Today's music is consumed in many forms and in the majority of cases that form involves some kind of lossy codec. THe most common term used to describe this is 'mp3', even though the codec may be something related to mp3 (aac) or a distant cousin (ac3 for instance). Since it's in common use listeners are becoming familiar with the 'sound' of mp3. What's that?
In or to psyche that out it's important in simple terms to understand how a 'lossy codec' works:
Most audio is recorded/mixed/mastered using a system called PCM audio. PCM is a high fidelity system that can capture and reproduce audio faithfully and with minimal artifact. The problem with PCM is that the amount of data required to record 1 minute of stereo 'CD quality' of audio is fairly large (very roughly 10MB). That's not a lot of data by today's hard drive standards but if you are trying to download a song or stream audio in real time the data adds up fast. So enter mp3. A standard fidelity Itunes download reduces file size by about 90%! That's huge. How does it do it? It uses a psychoacoustic model that predicts what part of the sound the 'average listener' is less likely to miss....and throws it away. The audio that's discarded is very hi frequency, very low frequency and stereo ambient information (reverb etc). THat's stuff we don't hear so well. THe lower the mp3 bit rate the more of that goes away. It's really a very clever system and has allowed digital distribution to take hold.....but there's an insidious phenomenon here. In order for a recording to sound good in mp3 form you need to have some of that information in the recordingeven though we don't hear it so well. THat way, when the mp3 is rendered you are still left with audio of a 'reasonable' fidelity. However, if PCM recording begin to take on the 'aesthetic' of an mp3, the mp3 derived from the PCM file will be 'worse'....so the argument stands for the highest fidelity possible for a master recording. That way and audio derived from it for digital download or broadcast, will sound 'ok'.
I always encourage those who make music to listen to CD's or high resolution downloads so they know what good audio can sound like and don't accept lossy compression as the de facto standard. It's fine for the consumers, but not for the artists and producers.