I agree that for any kind of critical listening you'd want the highest quality file possible for your music server, CD quality at a minimum and even higher if you can find it.
But, I listen to music in a lot of situations, planes, the gym, in the car, where the difference between a 256kbps mp3 and a lossless file just isn't audible. Being able to download and discover new music conveniently and cheaply is great. I don't get a lot of music from iTunes but have a subscription to emusic.com that I've found to be great for exploring music I might not otherwise ever know about.