Producers have been encoding music using superior, lossless, 24-bit audio formats for a long time, but what the users actually purchase through the iTunes store is a compressed 16-bit version of the track. And why not? Actually, the vast majority of the music, which is distributed online, comes in a lossy 16-bit audio format in order to speed-up downloads and to keep the file size low. Average Joes cannot tell the difference anyway, which begs the question how the people may be convinced to pay the extra price tag.
Another downside is that neither the iPhone 4 nor any iPod is currently capable of 24-bit audio playback, even though the latest versions of iTunes handle it flawlessly. Do not expect to notice any difference on your cheap multimedia speakers or your good ol' earbuds either. Lets hope that a solution to the problem is in the works and will be implemented in the iPhone 5, the iPad 2, and the next generation of iPods.
source: CNN via Engadget