Lossless audio compression allows one to preserve an exact copy of one's audio files, in contrast to the irreversible changes from lossy compression techniques such as MP3 and AAC. Compression ratios are similar to those for generic lossless data compression (around 50–60% of original size), and substantially less than for lossy compression (which typically yield 5–20% of original size).
The primary use of lossless encoding are:
Archives
For archival purposes, one naturally wishes to maximize quality.
Editing
Editing lossily compressed data leads to digital generation loss, since the decoding and re-encoding introduce artifacts at each generation. Thus audio engineers use lossless compression.
Audio quality
Being lossless, these formats completely avoid compression artifacts. Audiophiles thus favor lossless compression.
A specific application is to store lossless copies of audio, and then produce lossily compressed versions for a digital audio player. As formats and encoders improve, one can produce updated lossily compressed files from the lossless master.
As file storage and communications bandwidth have become less expensive and more available, lossless audio compression has become more popular.
Easy CD-DA Extractor supports following lossless formats: Monkey's Audio (.ape), FLAC (.flac Free Lossless Audio Codec), Apple Lossless (.m4a), WMA/Lossless (.wma Windows Media Audio), WavPack (.wv), and WAV (.wav 16-bit Stereo 44.1kHz PCM).
Source: Wikipedia