as dvorak said, CD's are a digital representation of an analog signal (the source recording). this source recording is sampled at a rate of 44.1 kHz which, without going into DSP theory, means that the highest frequency a CD can reproduce is 22.05 kHz. This is beyond the range of human hearing (20 Hz - 20 kHz) so people who claim this to be a detraction from a CD's sound quality is probably full of shit or is part dog.
however, it is definitely possible to hear a difference in encoding rates. it bugs the hell out of me to listen to an mp3 encoded at less than 192 kb/s - the higher frequencies really suffer.