Ummm, I thought ipod downloaded in the more compressed mpeg-4 format or at least they did when I helped my nephew download songs onto his a month ago.
iPods can play MP3's, AAC and AIFF formats. The new ones can play the new lossless format as well. AAC is the best choice because of small file size to audio quality. All songs purchased form the itunes music store are in AAC format. Once you burn them to a Audio CD you can then convert them from the cd to any format you want. So much for a conspiracy.