HI, maybe to amplify this:
When you want to have the highest possible quality (at somewhat reduced space requirements), the obvious choice in iTunes is Apple Lossless.
When downloading music to your iPod, such high quality is maybe not required and space is at more of a premium. iTunes provides the option of downconverting to 128-AAC before transferring to iPod.
There are lots of other considerations for example the use of FLAC v. ALAC when you also have a Squeezebox and the possible quality difference between MP3/LAME v. AAC at various bitrates.
Maybe one final comment (not sure what your level of technical competence/experience is): AIFF and WAV files are full-space copies of the CD. They do not give you a quality advantage to the lossless alternatives of FLAC and Apple Lossless (ALAC). MP3 and AAC provide lossy encoding at still smaller file sizes.
Ferdi