If you’re using iTunes/iPod/QuickTime 6 you can start burning music in AAC format, the audio spec for MPEG-4. The encoding is better than MPEG-3 resulting in smaller file sizes (at the same bit rate) and higher quality sound. Mp3s couldn’t match CDs for sound quality because they relied on earlier, imperfect perceptual coding algorithms; AAC comes much closer.
You can make this change in iTunes preferences. Upping the bit rate also helps, I’ve got mine set on 192 bps. 128 is more common and uses less space, but 192 sounds better. You can always down sample it later if you run out of space, but you can’t up sample without re-burning the track.
You can tell Apple is behind this migration because they’re selling songs in their store in AAC format, and iTunes even has ‘convert to AAC’ menu choice, making the process easy. I’ve been holding off on the mass burning of my CDs due to mp3’s limitations, but now I’m ready.