A simple Google search of "FLAC versus MP3" would give you an idea, but here's a particularly informative series of paragraphs:
Lossless vs Lossy
The file containing a typical three-minute song on a CD is 30–40 megabytes in size. A 4-gigabyte iPod could therefore contain just 130 or so songs—say, only nine CDs' worth. To pack a useful number of songs onto the player's drive or into its memory, some kind of data compression needs to be used to reduce the size of the files. This will also usefully reduce the time it takes to download the song.
Lossless compression is benign in its effect on the music. It is akin to LHA or WinZip computer data crunchers in packing the data more efficiently on the disk, but the data you read out are the same as went in. The primary difference between lossless compression for computer data and for audio is that the latter permits random access within the file. (If you had to wait to unZip the complete 400MB file of a CD's content before you could play it, you would rapidly abandon the whole idea.) You can get reduction in file size to 40–60% of the original with lossless compression—the performance of various lossless codecs is compared here and here—but that increases the capacity of a 4GB iPod to only 300 songs, or 20 CDs' worth of music. More compression is necessary.
The MP3 codec (for COder/DECoder) was developed at the end of the 1980s and adopted as a standard in 1991. As typically used, it reduces the file size for an audio song by a factor of 10; eg, a song that takes up 30MB on a CD takes up only 3MB as an MP3 file. Not only does the 4GB iPod now hold well over 1000 songs, each song takes less than 10 seconds to download on a typical home's high-speed Internet connection.
But you don't get something for nothing. The MP3 codec, and others that achieve similar reductions in file size, are "lossy"; ie, of necessity they eliminate some of the musical information. The degree of this degradation depends on the data rate. Less bits always equals less music.
As a CD plays, the two channels of audio data (not including overhead) are pulled off the disc at a rate of just over 1400 kilobits per second. A typical MP3 plays at less than a tenth that rate, at 128kbps. To achieve that massive reduction in data, the MP3 coder splits the continuous musical waveform into discrete time chunks and, using Transform analysis, examines the spectral content of each chunk. Assumptions are made by the codec's designers, on the basis of psychoacoustic theory, about what information can be safely discarded. Quiet sounds with a similar spectrum to loud sounds in the same time window are discarded, as are quiet sounds that are immediately followed or preceded by loud sounds. And, as I wrote in the February 2008 "As We See It," because the music must be broken into chunks for the codec to do its work, transient information can get smeared across chunk boundaries.
Source:
http://www.stereophile.com/features/308mp3cd/
In short, having lossless music -- especially lossless rips with the CUE and LOG -- is just as good as having the CD itself. Heavily compressed files are not the same.