Yes, iTunes uses AAC but this is not 100% specific to iTunes - it's your other players that are limited and more and more of them are supporting AAC.
Converting to a different format is a separate step. Remember, each time you convert to a lossy format such as AAC or mp3 you lose quality, so I avoid converting unless absolutely necessary.
iTunes: How to convert a song to a different file format - http://support.apple.com/kb/HT1550 - including information about different formats and discussion about compression.
With iTunes you do not move the file, you have to let iTunes do it. If you do it then iTunes loes track of it 9with one or two notable exceptions). Now you have to decide, do you want to move teh whole library, or just your media? Your library is all the files in your itunes folder. For most this is the best because it is easy.
iTunes: How to move [or copy] your music [library] to a new computer [or another drive] - http://support.apple.com/kb/HT4527
Quick answer if you use iTunes' default preferences settings: Copy the entire iTunes folder (and in doing so all its subfolders and files) intact to the other drive. Open iTunes and immediately hold down the Option (alt) key (shift on Windows), then guide it to the new location of the library.
Windows users see tip at: https://discussions.apple.com/message/18879381
Moving just media is a bit more complicated and can have negative aspects when it comes to future moves.
Thanks for the reply. Something I forgot (age) to mention, this quest to move the library is precipitated by the Mac drive is running out of space. While I still have about 50 gigs of room left, I was thinking I should just plan on opening up the space by moving the iTunes library.
The other reason is, I read an article about how upon ones death one can not bequeath ones digital music or book files to loved ones. IE; If all of the music was on LP's, tapes, cd's then this physical format can be left in ones final will. But according to what I read and trying to read the user policy by Apple, Amazon etc when one downloads music or a book or whatever that use policy says we don't own the material we only can read it or listen to it. When we die it dies with us. Several people in the article as well as myself believe this is crap. At one time I was purchasing content and then burning it. I stopped because I thought how silly to burn it, I have back ups on an external drive. Man was I wrong. If I have to I'll sit here in my last days and burn hundreds of cd's.
So realizing this, I want to take all my music files and save them to another drive as though this drive was hundreds of cd's. That way all those files in some other format can be played independent of iTunes or transfered to one of my kids PC's or a Mac if they get with the program. If the conversion process destroys the integrity of the file then I have no choice but to burn cd's.
In my estimation, I'm doing nothing wrong. I bought downloadable music just as if I'd bought cd's. I should be able to throw it away or give to my kids upon my death. The kids can decide what they want to do with it once I'm gone. I now no longer buy any music or books in a digital download. All content is purchased with a physical copy. That said, more content providers are moving towards downloads only or like Amazon and Apple towards the cloud and streaming. I realize all this gets into the fair use act but I think most people are unaware of this issue.
Moving the library is best done as suggested earlier.
Yes, there's the whole big issue of electronic legacies in the digital age. Not just your music but e-mail records of transactions, online accounts, photos, etc.
Of course one way is to make sure there is a record of your usernames and passwords (plus answers to security questions) in your will. As far as computers are concerned, anybody typing in the correct information is "you".
The other thing to remember is any music purchases made in the past couple of years are not DRM protected and the authorization thing really only crops up when transferring content to mobile devices or trying to download from the store (or things such as movies which still have DRM). If somebody inherits your computer then it will still play there.
Converting to another format doesn't trash a file, it just results in minor quality loss which you may or may not even notice depending upon the settings you use. Converting to a lossless format such as AIFF has no quality loss (but none gained back from the quality loss in the initial conversion) and does result in much larger file size.