Memory tells me that iTunes' default setting for importing from CD is AAC Encoder (file extension is .m4a). There's no dramatic reason why you should change this, it's perfectly acceptable. The iPod will play those files and if your phone plays them too, why change to a different format?
I believe most modern players will play AAC encoded files. The advantage of mp3 format is that it's universal, all music players will (or should be able to) play them, although I know of some Android phones that do not have a default music player installed, meaning that one has to find a player in the app store. However, there is an issue with files encoded with the Apple Lossless Encoder; I know of a Samsung Galaxy A7 that uses the Samsung app store's Samsung Music player, that will not play music in Apple Lossless format.
In other words, you (personally) need to have a good reason to change the format, not just go with what other people tell you. Not only that, but within both AAC and MP3 files, you can use a higher Bit Rate to copy from the CD into a digital format and that higher Bit Rate will give you improved quality of sound - more on that below.
One more point - and this is important: there is currently a large number of discussions here about Apple Lossless that may mislead you. The discussion refers to Apple's Apple Music service and the fact that it cannot currently be played in iTunes or on iPods. Ignore the subject, it's not relevant to music you import from CD. Now - back to your concern.
Good reasons for changing to an alternative format include:
- having a format that is playable on any music player application - MP3 (and usually Apple's default .m4a)
- improved sound quality - this is purely your opinion. See the paragraph below on using higher bit rates
- using Apple Lossless - improved sound quality at a smaller file size (uses less storage) - but this comes with my warning above. It's not playable on all music players
- Not all high quality formats can be used in iTunes, on an iPod or even on non-Apple phones. The .flac format cannot be played in iTunes or on an iPod
Higher Bit Rates:
Let's use MP3 format for this topic. The same principal applies with AAC:
- in basic terms, a higher Bit Rate produces better sound quality. So you could copy from CD into iTunes at (for example) either 128Kbps or 256Kbps (don't worry about what Kbps means at this time, just think that 256 is higher - and therefore better - than 128)
- if you make two copies of one song (or a few), using MP3 format; one at 128Kbps and the second in 256Kbps format, listen to each and compare the quality of the sound. Listen using the various methods you have for playing your music: headphones, Bluetooth speakers, wire-connected Hi-Hi, car stereo etc.
- you can try the same experiment with AAC if you wish
- if you can hear the difference between the two, and you prefer the higher Bit Rate version, then use the higher Bit Rate for all your music
- if you cannot hear the difference at the higher Bit Rate - and you don't think you will ever want to, stick with the lower Bit Rate, but see the point later on about using very low Bit Rates
- be aware that using a higher Bit Rate will increase the storage space used by that song, which may fill up the storage on both your iPod and your phone quite quickly
Using a very low Bit Rate:
although iTunes' lowest Bit Rate is now 128Kbps, if you hear about, or find a conversion programme, that creates files at lower than 128Kbps, do not use it for your music; it will not be good enough. That said, I follow a music Podcast that uses 56Kbps MP3 for its shows. It's okay for a presented programme, but not for your own long term music.
Avoid .WAV Encoder:
in iTunes' import from CD settings, you will see .wav encoder. That is basically the same format as CD. However, the file size is enormous (ten times more than the same song at 128Kbps), for no benefit. The standard formats used (MP3 and AAC) are specifically designed to produce smaller files in order to make them portable. There are also other disadvantages to wav; one of which is artwork. WAV files do not have artwork "in" the audio file, whereas MP3 and AAC do. In other words, when you copy a song to your phone, the MP3 and AAC versions include the artwork in the copy, but a .wav file would not and you would have to add it as a separate file to your phone and even then, the phone's player may not show it.
Last point about 128 vs 256Kbps:
Purchased digital music, in either MP3 or AAC, used to be sold at 128Kbps Bit Rate. However, the usual Bit Rate now is 256Kbps. Some stores sell higher Bit Rates and better formats too, but unless you can appreciate the difference (and your player supports them), don't spend extra on them.