Well, ogg files are quite good, I have to say that. I ran into a demo online (see below) and found it better than mp3, but lacking in dynamics when compared to wav. Still...a viable alternative. Next closest was, a-ha! Apple's AAC encoding. I'm not sure of the compression scheme or how much space it is expected to save, but it was really hard to hear the difference between AAC and Ogg. My point? The iPod will have access to using AAC, or whatever the most recent version is named. The iPod also will allow WAV and AIFF files (AIFF is a filetype very close to wav files with no compression). So if you want the sound quality for some of your files, but not all files, you can mix and match with the iPod.
The site is here
http://www.xiph.org/ogg/vorbis/listen.html.