I love quality so I still prefer disc (for selection) - I use emusic but, they are generally 192kbps mp3 [dreaded] - I think the quality is fair for the price. I pay around $20 a month for 50 downloads. They have tons of new albums in almost all genres each and every month. They also had a lot of crap like greatest hit albums that have been re-recorded without half the original band members - so beware! My fellow users usually have great comments and additions to the forums that spell out which selections are the real deal.
I have not used itunes except to gather free podcasts - which can be an excellent way to experience new music legally. I search many blogs as well that have limited releases, re-releases, and demo sneak peaks - quality can be sketchy to say the least.
Yes - mp3