• FLAC
  
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  Free Lossless Audio Codec (FLAC) is a codec for lossless audiocompression. Grossly oversimplified, FLAC is similar to MP3, but lossless, meaning that audio is compressed in FLAC without any loss in quality. This is similar to how Zip works, except with FLAC you will get much better compression because it is designed specifically for audio, and you can play back compressed FLAC files in your favorite player (or your car or home stereo, if supported) just like you would an MP3 file.
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  Features
  Lossless: The encoding of audio (PCM) data incurs no loss of information, and the decoded audio is bit-for-bit identical to what went into the encoder. Each frame contains a 16-bit CRC of the frame data for detecting transmission errors. The integrity of the audio data is further insured by storing an MD5 signature of the original unencoded audio data in the file header, which can be compared against later during decoding or testing.

  
  
• Lossless
  
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  Lossless compression is a compression methodology in which the result of the compression can be restored faithfully, i.e. bit-by-bit identical with the uncompressed data.
  
  In a nutshell, it is somewhat like compressing a Waveform file with ZIP or RAR.
  
  The difference between 'mere' ZIP/RAR is that lossless compression algorithms are especially tuned and designed for the characteristics of Waveform data, thus achieving compression far greater than can be achieved by generic compression utilities.
  
  As lossless compression preserves all information of the original Waveform file, audio compressed with lossless compression will unavoidably be larger than audio compressed with lossy compression. However, this disadvantage is more than offset by lossless' ability to be transcoded to other lossless format without any quality degradation.

  
  
• MP3
  
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  MPEG-1 Audio Layer 3, more commonly referred to as MP3, is a popular digital audio encoding and lossy compression format, designed to greatly reduce the amount of data required to represent audio, yet still sound like a faithful reproduction of the original uncompressed audio to most listeners.

  
  
• Lossy
  
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  Lossy compression is a form of compression that significantly reduce multimedia file size by throwing away information imperceptible to humans.
  
  Human audio perception is not perfect. Lossy compression takes advantage of this characteristics. By selective discarding, much unnecessary information is thrown away. The amount of information discarded is usually adjustable, giving a compromise between small size bad quality and high quality large size.
  
  The downside to this is that waveform reconstructed from compressed information will never exactly match the original waveform.

  
  
• Transcoding
  
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  Transcoding
  Transcoding means converting a file from one encoding method (i.e. file format) to another. Transcoding can be performed from lossless to lossless, from lossless to lossy, and from lossy to lossy.
  
  Lossy-to-lossy transcoding
  Every time you encode with a lossy encoder, the quality will decrease. There's no way to gain quality back even if you transcode your 128kbps MP3 into a 320kbps MP3 (or any other high-quality compression)... Transcoding between lossy formats is therefore generally not recommended. The sound quality of the result will always be worse than the (lossy) source file.
  
  Lossless-to-lossless transcoding
  Unlike the aforementioned lossy transcoding, quality will not decrease. Thus you may transcode from one lossless format to another as often as you like (e.g. to take advantage of better compression or better error-correction or better hardware support).
  
  Lossless-to-lossy transcoding
  Keeping lossless archives gives you the opportunity to re-encode music in the future to other lossy formats as encoder technology improves. For example, if currently lossy format X is transparent at 192 kbps, while in three years lossy format Y is transparent at 128 kbps, it is still not likely that transcoding from X@192 to Y@128 will give acceptable results, contrary to transcoding from lossless. This is due to the fact that X, being lossy, already removes some information it considers unimportant, but which in fact is important for Y. The result is Y's encoding will be greatly maimed... If you are transcoding to lossy encoding from a lossless source, it is strongly recommended to keep the lossless source files. Thus, if the lossy result is not satisfactory, you can reencode easily.

• Transcoding (cont'd)
  
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  Lossy-to-lossless
  Kinda pointless, except in specific applications. Generally, don't do it.
  

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  The downside to this is that waveform reconstructed from compressed information will never exactly match the original waveform.

The downside to this is that waveform reconstructed from compressed information will never exactly match the original waveform.