A guide to the latest developments in the world of music downloading

This may come as a shock, but ask modern teenagers about their CD collections and you may as well enquire about their vinyl records and Betamax videos.

A slight exaggeration, perhaps, but the writing is clearly on the wall for compact discs. Recently the major label Mercury Records - home to Elton John and Arcade Fire - announced that because of changing consumer habits it will no longer release regular CD singles. The download generation store the majority of their music on a computer hard-drive, not a bedroom bookcase, and with good reason: why search for a misplaced CD when you can find and play a downloadable track in seconds? Downloadable music is quick, convenient, and is already the norm.

For those of us brought up on "physical" devices like CD, cassette and vinyl, the world of WMAs and WAVs can be bewildering and even slightly intimidating.

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Record companies were slow to embrace the digital revolution so the first wave of MP3s - created and shared unofficially - were of dubious quality and frequently carried viruses. Downloading music from unofficial sources remains a risk to your system, but create an account with a recognised store such as iTunes and with one click a track can be quickly and safely transferred to your computer, ready to be played via a variety of devices. Modern cars, hi-fis and TVs are now invariably MP3-friendly.

People with an iPod or MP3 player will probably have long been "ripping" their regular CDs, which is a relatively straightforward process. When carrying out such a task, however, it is wise to consider your options.

Technically, of course, the CD itself is a "digital" format, as the tracks consist of binary information that can be read by - and played on - a computer. But there are several rival - and far more flexible - digital formats, all vying for your custom. MP3s - developed by Germany's Fraunhofer Institute in the late 1980s - are by far the best-known type, but anyone who has ripped a CD using the PC-based Windows Media Player will have encountered Microsoft's own MP3 variant, the WMA (Windows Media Audio). Slide an album into your PC, follow the pop-up prompts and its tracks will automatically be converted into individual WMA files. Unfortunately, while of slightly better quality than MP3s, WMAs are compatible with far fewer devices.

Apple users may have come across the AAC (Advanced Audio Coding) format, meanwhile. The default setting for Apple's iTunes, this MP3 variant is also supposedly superior but flounders on many non-Apple devices. So what do independent experts make of this quality/compatibility conflict? Sam Lin is an electrical engineer and blogger who has rigorously tested digital audio systems via his website, blog.lincomatic.com, and remains a devotee of the humble MP3.

"I prefer to use the most ubiquitous format that is supported by the widest range of devices,"says Lin. "What use is it to have slightly better-sounding music if it limits what devices you can play them on? Recall the Betamax/VHS wars. Beta was clearly better, but VHS won because it was an open standard and adopted by more manufacturers. MP3 is ubiquitous and firmly entrenched and is not going anywhere soon."

Digital music is also infinitely adjustable: AAC, WMA and most other audio files can easily be converted to MP3, and vice versa, via a useful programme called Switch.

Once you have decided on a format, the size and quality of your audio tracks is also worth considering. Popular file types like MP3, WMA and AAC are known as "lossy" formats, which are created by filtering and compressing elements of the encoded content without drastically altering the sound. The more compression that takes place, the less time it takes to create or transfer a file, which is measured in bitrates, and you can often adjust this beforehand. The least-compressed, highest-quality MP3 file readily available is 320kbps, but 128kbps remains the default setting for many devices.

However high your bitrate, traditionalists remain sceptical about the sound quality of compressed digital files when compared with older, physical formats. In truth, the actual playback methods are often a major factor: MP3s on tinny headphones will never sound as impressive as a CD in a good hi-fi system, but level the playing field and the results are rather different.

Back in the early days of the digital revolution, Sam Lin did a thorough analysis of the two formats, comparing CD and MP3 versions of a carefully selected pop song and a classical piece, and came up with some intriguing conclusions. "I didn't expect MP3 at any bitrate to be able to challenge CDs," he recalls, "but in my tests the high bitrate MP3s were sufficiently close enough."

A decade on, and both digital technology and our listening habits have evolved. Jonathan Berger, a Stanford University professor, has been testing students' reactions to digital music since the early years of the century, and recently discovered something novel and slightly surprising: the latest batch of students preferred the sound of MP3 to that of a CD. Berger suggests that MP3s have a subtle metallic sound, and that this "sizzle" is becoming as familiar to listeners as the warm crackle so beloved of fans of vinyl.

For anyone less enamoured with potential "sizzle", there are also "lossless" digital formats, which create an exact replica of the original source material. WAV (waveform audio file format) is the best-known, while a newer system called FLAC (free lossless audio codec) is becoming the format for those in the know, and who have filespace to burn. These non-compressed files do require a good deal more of your computer's memory, and take much longer to transfer. Ripping a CD collection this way would, on a regular home computer, be quite an undertaking.

For the moment, most music listeners are content with lossy formats, and Lin suggests that the low-bitrate MP3, 128kbps, should suffice "if you're the type who listens to pop, disco or grunge on bass-heavy earbuds through an iPod". He also says that if your listening habits involve "acoustic, jazz or classical on high-quality audio systems", you might prefer to trade up.

The problem with new technology is that it continues to evolve, and, like the similarly ubiquitous VHS, MP3s will inevitably be superseded. As storage capacities get bigger and download rates quicken, so an uncompressed format like FLAC could become the industry standard sooner rather than later. Lossy files like MP3 cannot currently be converted to higher-quality alternatives, so the more discerning listeners may well end up re-ripping or re-buying those tracks eventually.

Take heart, then, if you do not yet feel ready to surf the choppy waters of post-CD audio.

It may just pay to wait for the next wave.