When you purchase music on iTunes, it comes compressed, where some of the musical information is eliminated in order to save data space (there are however some lossless compressed formats that retain all of the data). Somewhat similar to MP3s, Apple has their own format called AAC. Purchased tunes usually have a bit rate of 256KB. For reference, an uncompressed CD has a bit rate of 1,440KB and a bit depth (different from bit rate) of 16 bits. There are audiophiles who'd probably like to make compressing music illegal, complaining that it degrades audio quality. Personally, given the choice, I'd always opt for uncompressed music.

How good or bad is quality of music purchased on Apple's iTunes? That depends how the recording artist delivers the music to Apple. There are 2 methods: In the first, the artist delivers a CD to Apple. Then Apple compresses the songs to their AAC format. In the second method, the artist provides a copy of the master recording at the original bit depth and bit rate, which is usually higher than CD's 16 bit depth and 44 KHz bit rate. As you'd expect, this master copy sounds better than a CD. Apple than transfers this master to their 32 bit depth equipment and then converts it to AAC. This method results in superior sound over the first method. Are iTunes songs as good or better than CDs? No, but sometimes they're close. I have purchased entire albums on iTunes and they sounded great. Naturally, I would prefer to have the original CD or a non-compressed high-resolution version on SACD or downloaded from websites like HD Tracks. However, many CDs are either very expensive imports or out of print. Often, iTunes will offer these at much lower prices. I've purchased several and haven't been disappointed with the audio quality. There are rumors that someday Apple may offer lossless music files. I hope that happens. Apple has put more info in a white paper that you can download at: https://www.apple.com/itunes/mastered-for-itunes/docs/mastered_for_itunes.pdf