It might be "very well said", but technically what iSaint described is NOT breaking any law. With the exception of DVDs (which are covered by the DMCA because their content contains encryption which must be broken in order to make a copy of said content), it's perfectly legal to rip your CDs to MP3s, AACs, or any other digital media format... and it's perfectly legal to transfer your 8-tracks, LPs, cassettes, or any other music to CD, computer, or whatever.
What ISN'T legal is making a copy and then distributing the copy to someone else, or retaining the copy when you give/sell/rent/loan the original media to someone else. When you do that, two people have what only one person paid for. That's copyright infringement.
If people are ripping their CDs to audio files and then transferring the CDs to someone else, technically that's illegal.
Back on topic, if this company is just trading you an iPod for your CDs, there's nothing illegal about that... but I have seen many spam e-mails where companies are offering an iPod PLUS rips of your CDs in exchange for your CDs. That's illegal.