With the release of iTunes 9, there is a new option for Bit Rate Conversion to 128k AAC on the Summary tab when syncing an iPhone or iPod. I turned this one last night, and, after a long initial syncing/conversion process, it almost doubled the amount of free space on my iPod Touch! Is there a significant negative impact on sound quality? With my initial trials, including listening through headphones and through a speaker dock, I couldn’t tell much difference. There was a slight hissing noise apparent on one track from the new She & Him album ‘Volume Two’ that I downloaded from Amazon, but that may also be there on the original 256kb MP3 track.
— Vlad
It depends on what you mean by significant. There is a loss of quality, naturally. But give it a listen. How does it sound to you? If it sounds good to you, then you have your answer. It really depends on what you are using to play back the sound, though. If you pump your iPod through a high-end stereo system, you might hear more of a difference than if you use earbuds or a typical car stereo.
(I gotta get that second She & Him album. Loved the first one.)
After a week of running my iPod Touch with the 128kb conversion, I can honestly say that I hear no difference. I mostly listen to it through my headphones while working out, or when trying to focus on a document at work. It's been really nice to almost double the capacity of songs as I have the second generation 16 gb version, and I've struggled with the capacity limit in the past. My wife also has an older first generation 8 gb version with a shot batter that we use with a speaker dock. I've decided to use the convert feature for this older iPod as my guess is that sound quality differences are more apparent via a speaker than via headphones.