The digital music revolution has been a blast for consumers. The record was then the tape that became the compact disc. Of course there are a few missing steps but that is the basic evolution of the industry in my lifetime. Each of those steps has been exciting and offered something good for music lovers. The recent explosion of digital music has been simply awesome. It's easy to remain loyal to older formats and it's common for "experts" to be critical of compression formats, pointing out a loss of quality. Similar to digital photography, there are both loss and lossless formats. Hardcore digital photography folks writhe of the thought of archiving photos in JPG and music buffs hold a certain disdain for the MP3 format. Sure there are better ways, but for most people, the easiest and most economical of choices are good enough.
I'm not about to give my opinion on the matter because I'm not an expert and it would bore you and I both to tears. What I will say is that I love digital music. I've ripped all of my CD's into VBR (variable bit rate) MP3. Yes, MP3. The VBR makes for a much more effective use of space, allowing for less compression where it matters and less where it doesn't . Highly compressed MP3 files is where you get into the poorer qualities. Anyway, there are countless ways to rip, encode, burn, store, play, stream, etc. I've adopted a system that I'm very happy with and I thought I'd share. Although I must warn, if you have a lot of music, you'll need a ridiculous amount of time and patience to convert it all to a digital format. There are services that will do it for you but it is outrageously expensive!
First of all, I use an open source program called Exact Audio Copy to rip my CDs. Ripping is simply taking the WAV files from the CD and putting it onto your PC. It's an exact copy of your CD. EAC does this very well and also puts the hooks into other handy functions. Next, I encode with LAME. Encoding is the conversion of a WAV file to another audio format. Like I said, I've adopted the MP3 format with VBR. EAC and LAME work very well together in both ripping and encoding. It's reasonably well integrated as well. Also built into EAC is the CDDB (Compact Disc Database) look-up. I've adopted the open source version, of course. More about CDDB. This service simply takes the unique ID of your CD and automatically enters the applicable information into the tag fields of your music file. For example, It will apply a chosen naming convention for your music files and apply it as it's ripping and encoding. The name of the artist, song name, year, etc. are all stored in the music file properties, some are visible in the file name and some are not.
There are a myriad of ways to store and organize your music files and it's really just a matter of preference. I organize mine in simple folders by genre, then artist name, then album. It's 
basically a three folder hierarchy. This whole process takes many hours so I'd highly recommend backing up your music files. I have a backup on a separate hard drive and then I have a backup on DVDs that I keep outside my home. I'm not about to lose my files! What you do with these files is important as well. There are many uses but my primary two are mobile player and home streaming. My digital music player of choice is the iRiver (I have the HP40 hard drive player). I love the versatility and high capacity. They don't make my specific model anymore and I've heard mixed reviews of the newer ones.
At home, I use (and love) the Sqeezebox from Slim Devices. This little appliance sits with my receiver. It has an optic connection going out to my receiver. It is wirelessly connected to my 
computer. The computer runs a server called the SlimServer. Using a sexy little remote, I can play anything from my music collection with the touch of a few buttons. I can select by genre, artist, song, pretty much anything. it supports play-lists as well. A two line display shows you what is playing and allows you to move around the interface with ease. Did I mention wireless? There are all kinds of add-ons as well. It has a Internet radio service, support RSS feeds and a few other cool things. It's under $200 too, which is great.
Finally, because we recently moved into a new house, I was able to easily set up for distributed 
audio. By having some speaker wire and CAT-5 wire strategically placed during house framing, I was able to have volume controls and speakers in three other rooms and the backyard patio in addition to the family room where the stereo is. I used a simple switch box to enable or disable music to the alternative rooms. You need a good receiver that has decent watt output in an alternate zone. The volume controls themselves have a little amplification, which helps. I used the Russound A-BUS system for amplified volume controls.
So that's about it. I have credit a buddy of mine at work, Greg Matthews, for most of these ideas. He introduced me to EAC, LAME and Slim Devices. It helps when someone you trust does the footwork because then you don't have to figure it all out yourself, which helps when there are so many choices. I'm sure my setup is already outdated as it is two years old after all. But that's okay, it makes me happy. Following this stuff is fun and it's exciting to see where the industry is going.
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