AAC or AppleLossless

Apple Loseless will cut file size by 50%, AAC can perform greater size reduction. Loseless sounds better. Unless you have a very small music collection I would strongly recommend that you obtain an external HD and store the music files on it. Depending on the size and/or number of external drives you use you could store your music in the AIFF uncompressed format.

Tvad, the post is about using a computer as a music server, nobody has mentioned anything about using an iPod.

Pardales, the only advantage of the AAC format is that it can compress down to smaller files sizes. Compared to non-compressed or Apple Loseless there is a penalty in sound quality. It's a value judgement whether that trade-off is acceptable, but if you're using a 500Gb HD where you can store approximately 700 (non-compressed) to 1,400 (Apple Loseless) CDs. Is your music collection so large that it cannot fit on one or two 500Gb drives?