Yes, all it does it play the file through the sound card and record it straight back, so it will work with *any* audio file that your computer can play. However, since it basically unpacks the (already lossy) audio to analogue, and then re-encodes it (presumably to a lossy format), you will loose quality.
It's basically the same as burning to a disk and re-ripping, except it doesn't require CDs.
Using the "
analogue-loophole" has got to be one of the most in inefficient ways to acquire DRM-free music. Just don't bother.