So Apple has this new Music Store thing where you can buy individual tracks for 99 cents (U.S. dollars, and in the U.S. only right now), or albums for $10 USD, through the iTunes music player application—significantly, there's stuff from all the major music labels there, which is a first for a fully-legal pay service. Still a lot missing, but since there's no subscription, you only pay for what they have that you want.
The music files are encoded as MPEG-4 AAC (Advanced Audio Coding) files with some copy-prevention (a.k.a. "digital rights management" or DRM) built in—you can share the files on up to three authorized Macs (and Windows machines later this year, they say, i.e. if the service isn't a failure), stream them out over a subnet or the Internet, etc. You can't cross-encode them to MP3, AIFF, WAV, or unprotected AAC within iTunes or with Apple's QuickTime audio/video software, and so far no other music software will play the files.
However, you can sync them with as many iPods (which will play them with a firmware update) as you like, and burn them to standard audio CDs straight from iTunes. Of course, since CDs know nothing about copy protection, that means you can re-rip the tracks into MP3s or other audio formats. Files converted from CD always lose a bit of quality (though not as much as to cassette tapes), and here the loss is exacerbated from the original files, which are already compressed a bit. So there will be a quality loss, but not a huge one.
Apple knows that, and presumably the record companies know that. It may be the reason that the purchasable AACs are 128 kbps (kilobit per second) files—good quality, sonically much like 192 kbps MP3s, but when re-ripped probably just gunged up enough to be noticeable. They're betting that it will be just enough of a hassle and quality loss that people will pay for the tracks anyway rather than just going to Gnutella.
We'll see. I'd bet the price drops as the selection improves over the coming months too—50 cents per track eventually, I'm guessing. It might just work.