The audio quality is excellent! My music files are encoded at either 160 or 192Kbps. It thumps. And I can dock it to external speakers to share with everyone if I want.
Is it as good as a CD?
I'm just going to have to listen to one of these things some time and see what they sound like. There's no denying the convenience and portability factor.
That's the real beauty to a high capacity digital player like the iPod or some other brand. Being able to encode your music at a 192kbps rate or higher and not have to give a frag about how much room it takes up. For the audiophile, 128kbps and lower is unlistenable.