There are (at least) two ways of making music CDs. One is the kind you can buy in music stores, and is called '
Audio CD'. The store-bought variety tends to be stamped, but is otherwise identical to an Audio disc you burn yourself. Audio CDs contain uncompressed audio data at a certain sampling rate formatted as .AIFF (called .WAV under Windows).
That's a common misperception, but it's not true. The information on an audio CD isn't formatted AIFF (the Red Book standard for audio CDs was invented in 1980; the AIFF file format was invented in 1988, and the .WAV format was developed in 1991.
The music on an audio CD has no files. It's just a stream of bytes, with each pair of bytes representing the volume of the sound at that instant in time. Early audio CD burning software could only handle WAV or AIFF sound files, and these sound files had the headers stripped out, all the metadata removed, and were written to the disc as a bytestream containing only sound information and no other information.
What do you think of the other formats and bit rates? Higher Mp3 rates, higher AAC rates, FLAC and so on. Ever listen to these different rates? A friend of mine swears there is no audible difference between CD and MP3 quality.
There are people who say there's no difference between a TIFF and a JPEG too. Those folks might not NOTICE the difference, but it's there.
MP3 files, like JPEGs, use "lossy" compression--the quality of the sound is deliberately degraded in order to make the file smaller on disk. Some people can't hear the degradation until it starts to get pretty bad; some people can. The quality of your amplifier and speakers will also make a difference.
Can you tell me a little more about getting "better than CD quality"? Can my Mac handle higher rate/better audio than my stereo CD player?
CDs store music as a stream of 16-bit, 44.1kHz samples. That means one second of sound is divided into 44,100 slices. The volume of each slice is measured on a scale from 0 to 65535, where 0 means "silent" and 65535 means "maximum volume."
In 1980, when the CD standard was released, that was about all the electronics of the time could cope with.
There are many modern audio standards that are higher resolution. DVD audio, for example, can sample at 44.1KHz all the way up to 192KHz, and can store each sample as a 24-bit number rather than a 16-bit number.
So where CDs divide a second of sound into 44,100 slices, and each slice is stored as a number ranging from 0 to 65,535, DVD-audio can divide a second of sound into as many as 192,000 slices, and each slice can range from 0 to 16,777,215. DVD Audio therefore captures the sound with much higher fidelity.
On Mac OS X, the computer's operating system can handle audio at 32 bits and almost any sample rate up to 192kHz. Whether or not it will PLAY at that resolution depends on the audio hardware in your Mac. By default, sounds will be played at CD quality through your Mac's sound hardware--44.1kHz, 16-bit. Your Mac's hardware is capable of 48kHz, 24-bit output, if you use the optical audio connector on your Mac--better than CD quality, yes, but you won't likely hear the difference unless you're using some really high quality, top-end speakers. There is audio gear you can attach to your Mac that is capable of even better quality (which is part of the reason the operating system supports such high quality sound).