About dynamic compression and lossy codecs
Mustang_steve mentioned Creed and I just bought their Greatest Hits CD, so let's use that as an example.
The My Own Prison wave file that I ripped from the CD has the following statistics (according to SoundForge):
RMS power: Left = -11.24 dB, Right = -11.70 dB.
Min sample value: -32,768 (0dB, -100%)
Max sample value: 32,762 (-0dB, 99.98%)
This is pretty typical of modern CDs. Very loud (-11dB) and lots of peaks right at 0dB. It never lights the clip indicators, but the Peak meter hits zero every second. The 'crest factor' is the difference between average level and peak level. For this song, the level meters occasionally drop as low as -12dB, but for the majority of the song they never go below -6dB. So the entire dynamic range of the song has been compressed to roughly the top 6dB.
Converting the wav to mp3 (192 kbps):
L = -11.34 dB, R= -11.81 dB.
The min and max sample values are now both at exactly 0dB (-32,768 and +32,767 respectively). So, the rms power was decreased ever so slightly, but there are now far more peaks at 0dB and the clip indicators light repeatedly throughout the whole song.
The clipping may be audible on some systems, but usually not because the interval is very short. I think for these cases, some people may very well notice a difference that they don't like. Now, is that a condemnation of the mp3 format itself or should we blame the recording engineers that pushed the limit and compressed the song to be as hot as possible?
I can hear the occasional sibilance and 'not quite right' sound on the mp3 too, but it really isn't much worse than the wav. I accept the subtle degradation in sound quality, but place the blame on the original mastering of the CD.
Compare that to an older CD that was mastered conservatively (say -18dB) and no peaks anywhere near zero. I won't bore you all with an example of the statistics for a such a file, but suffice it to say that it exhibits none of the subtle 'artifacts' that does the Creed example and it sounds excellent.
So it really is dependent on the quality of the source, but for my ears mp3 works well enough that I like the convenience of smaller file sizes and almost-as-good sound quality. Naturally, I keep the wavs around too for my 'archive' of my cd collection, but I generally play the mp3s.