[SpecMode]

On regular speakers, one song generally sounds as good as any other regardless of format or bitrate, to me at least.

OTOH, for portable use I have a pair of Grado SR-125s and Shure SE420 in-ear phones, connected through an Audio-Technica headphone amp powered through the dock connector. Generally, I can readily tell the difference between tracks encoded at <=160Kbps from higher bit rates, and occasionally between high-bitrate lossy (AAC/MP3) and ALAC-encoded tracks. There's slightly more definition at the higher end and richer bass on high-bitrate (320Kbps) and lossless tracks, and virtually no distortion at any range on the latter unless it was part of the original recording itself.

But then again, I'm not the "typical" listener, so for most people this would work just fine. I might suggest that Apple add a preference to change the default conversion bitrate to, say, 256Kbps for the pickier folks out there, though.