Understanding Audio Formats

"Digital audio has been around a very long time so there’s bound to be a plethora of audio formats out there. Here are some of the more common ones, what differentiates them, and what to use them for. Before we talk about everyday audio formats, it’s important you understand the basics, and that means understanding PCM. After that, we’ll tackle compressed formats."

This is a nice high-level tutorial that will explain the basic difference between the different types of audio files.  More importantly, it will tell you why you should care.  From my own personal experience, if you are the type of listener that sticks with the stock headphones that come with your media player then a 128kbit MP3 is probably fine for you.  But if you are going to upgrade your equipment, then you really owe it to yourself to upgrade your file format as well.