I tend to use 256k variable bit AAC encoding. MP3's may be a bit more portable, but I never decerned a need for that portability as all my devices can read the music in AAC format. For instance, my Sony bookshelf system can read my AAC files off my USB key just fine.
I'll likely re-evaluate things when I finally break down and buy a nice audio system. But that's a long ways away.
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