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Well, basically lossless refers to the type of compression. First, lossy compression such as MP3 takes out some of the audio from the music, what it takes out is out of our normal hearing range so thus the rationalization for this is that we can't hear it and don't need it. Now lossless compression on the other hand does not take out any of the audio and thus takes up more space.
 
To state what has been said in other ways, lossless audio formats are going to be of higher quality. But MP3's that are recorded at a bit rate of 192kbps or better are going to be good enough for 99% of listeners and take up less disk space than most lossless formats. thorne
 
Under iTunes->Preferenes->General Tab, there is an "Import Settings" button that you can use to choose from a list the encoder you want to use to import from your CDs to the iTunes library. There is an "Apple Lossless Encoder" in that list. If you have reservations about lossless encoding, then simply ensure that the "Apple Lossless Encoder" is not selected as the encoder used. As others have said, a lossy encoder with a high-enough bitrate usually more than suffices for most people.
 
It does. When playing lossless files, and the screen goes dark, the songs will start to skip. Apple has many discussions about this on their forums..
one in particular:
http://discussions.apple.com/thread.jspa?messageID=8257920&#8257920

I have been using Apple Lossless almost exclusively to put my favorite CDs onto my 1G iPod Touch and I have not had a single skip or stutter in the 5 months I've been using it.

I realize that some folks are apparently reporting this for both the 1G and 2G Touch according to that thread but it can't be a universal issue for every Touch out there.
 
I wonder why it is happening to some and not others? Also, it appears mainly on the 32GB 2nd Gen Touch, from the threads on here and Apple Support.:confused:
 
To add to what others have said, the reason it's 'lossless' is because the compression method decompresses to the original audio data, not a simplified version like you get with MP3, etc. Lossless decodes bit for bit, like a zip archive (or any of the other similar archive methods). The player has to decompress this on the fly, which I believe is more processor intensive than playing MP3s, which may be why it causes some players to struggle.
 
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