... Does anyone know how the iPod compresses songs?
As far as I know, strictly speaking the iPod doesn't compress
or encode them at all. It only knows how to decode them.
That may sound like a nitpick, but it's really not, for the
following reasons:
1) Decoding algorithms are simple and are "open" standards.
All MP3 decoding algorithms are therefore the same (except
maybe for computational efficiency issues, which are not very
relevant nowadays). Similarly all AAC decoding algorithms
are created equal. Decoding is like pulling out of a parallel
parking place; anybody can do it.
2) Encoding algorithms are very tricky, very compute-intensive,
and often very proprietary. A good MP3 encoder will greatly
outperform a bad AAC encoder ... and vice versa. (Here better
performance means, roughly, that the bitrate can go lower without
making the music sound bad.) Encoding is like getting into
a parallel parking space, when your vehicle has a trailer
attached.
3) There are several ways to obtain encoded material, including:
a) You can buy material that is already encoded.
b) You can encode it yourself using the iTunes application
(not to be confused with the iPod itself).
c) You can encode it using some other encoder.
Therefore my earlier remarks comparing AAC to MP3 didn't really
tell the whole story. It would have been better to say something
like this: the /iTunes/ AAC encoder outperforms the /iTunes/ MP3
encoder.
For some numbers on this, see e.g. the chart at the bottom of http://members.chello.nl/~m.heijligers/ipod/Compression/compression.html
although that seems more anecdotal than systematic.
It suggests that the free LAME MP3 encoder is neither better nor
worse than the iTunes MP3 encoder. Oddly, it does not compare
the iTunes AAC encoder to the corresponding free encoder (FAAC). http://www.audiocoding.com/
I imagine the iTunes AAC encoder is pretty close to the state of the
art, since they reportedly licensed it from the Fraunhofer guys, who
are at the forefront of the field.
I have zero first-hand experience with the iTunes encoders. All my
experience is with high quality proprietary AAC encoders (plus a few
noncritical applications of LAME).