I probably can't hear the difference. It's nice to have a lossless source so that you can re-encode to a low bitrate for your portable player, though. 256kbps lossy audio sounds good, but 256kbps lossy audio re-encoded to 128kbps audio does not. (Right now, I have enough "legacy" 128kbps MP3s to make re-encoding unworthwhile; everything fits on my 16GB micro SD card. But that will not last forever, and who wants to carry around a hard drive over a micro SD card :)

The real problem is that the people mixing the music probably don't have as nice a listening setup as most audiophiles do, so when you listen to that music you are listening to the inadequacies in the setup of the person who did the mixing. I still have brand-new albums in 2011 that are clipped! (Not to mention, more bass and treble than there should be. Cymbals do not make your ears bleed in real life.)

Yes. Not to mention that some "pirates" release recordings of such qualities, that you cannot buy on a CD/DVD (at least in my part of the world - Eastern Europe). For someone with a decent sound system these things DO matter, and 256kbps tracks are quite bad. Some 320kbps pirated mp3 albums are (almost) indistinguishable from a CD, and I would gladly pay to the people who ripped them :)

Also, have a look at this phenomenon https://en.wikipedia.org/wiki/Loudness_war Digitally mastered recordings DO SOUND BETTER on low-grade sound systems (that's the reason for their existence after all). But on a quality hi-fi system, those only make your ears bleed (as jockway mentioned). So every time I spend 15 Euro for an album, I'm virtually playing the lottery, as I have no idea what will I hear from it. There are regions (Japan mostly) where they sell way better (not digitally mastered) recordings, but as mentioned, I can't buy if I don't go there. So now guess why piratebay is the best source of music... (I can at least hear it before dumping it - if it's no good).