Jerry's right--but it also depends on the OS and the version of iTunes. (I'm assuming you're on Windows. If you're on the Mac, let me know; I'm bi. Bi-platform, that is.) The import settings used to be in the Advanced tab, but it seems to have migrated into the "General" tab in version 8.0.2.
If you are using the most updated version....
Edit > Preferences > General (tab) > Import Settings > ...and then select the "import using" dialog. I would suggest using either .aiff or .wav. I know there's an Apple Lossless codec, but not many (if any) media devices read it. Might as well stick to a standardized format. Most media players will read either .aiff (cd format) or .wav.
Note--each CD will now be around 700 megs. There is a price to be paid for lossless--and it's a massive increase in file size.
If you're there, you could also fool around with continuing to use MP3--especially if you have it set to "custom"...at 320kbs VBR highest quality. This will cut the file sizes down by around 80% relative to uncompressed file formats.
I use this setting for my non-critical listening albums, and with pretty satisfactory success. I know this is evil and sacrilegious to many--but if it's for family background music, sometimes the convenience is worth it.
I fully expect a beatdown at this point, but I'm prepared to take my chops. I'm ready to come out of the closet. I listen to compressed music formats every now and then. Putting 23 albums on one DVD is just damn convenient, and it doesn't sound all that bad to my ears. What can I say?--Frank's Insight DAC seems to make them unusually listenable.
Now--when I bring out the Bourbon, the (original) redbook CDs also come out to play... (And this is usually after the kids are in bed...)