I'm betraying my age by saying that during my college days, the coolness of your stereo was judged by the wattage of your power amp and the size of your (stereo) speakers. But headphones were what we used for studying in the dorm at night, and there Koss reigned supreme with its PRO4AAs -- originally introduced in 1970, and amazingly still made and much in demand today.
We also spent hours debating the merits of turntable cartridges, adjusting our tone arms for the best pickup, and carefully making mix tapes for the car using the then-revolutionary Dolby noise reduction system. We knew all about dynamic range and "clipping," and normalized our tapes manually by watching the signal meters and cueing and recueing each song to get the perfect gaps on tape. Making a cassette mix tape was easily a weekend job, and making the even higher-quality reel-to-reel tapes we used for parties was a group effort of the entire floor. We rearranged song lists ad nauseam, and delivered the requisite vinyl to the guy with the best system, who then spent a week making the tape under the watchful eyes of the rest of us constantly dropping by his room to listen and critique.
Our never-ending quest for sonic superiority seems light-years removed from today's "good-enough" culture of $20 earbuds and highly compressed music formats. Price and convenience seem to have dulled our sense of music appreciation. You rarely see a portable music player actually evaluated for its sonic fidelity, rather than its capacity and user interface.
But I'm here to tell you that your musical experience can and will be greatly enhanced by paying attention to reproduction quality. Really, there's nothing more mind-blowing that listening to great music through an equally great sound system. Fortunately, you don't have to compromise or spend a lot of money to enjoy both convenience and brilliant sonics. You can rip music from CDs in lossless quality in several formats: Apple lossless, FLAC and Monkey's Audio and Windows Media Audio lossless are some of the most common. The best one to choose depends on what is supported by your ripping tool and player of choice. (Easy Media Creator and Toast support most of these.) The basic point is that they preserve CD quality (hence the term "lossless") while reducing the space needed by about half. Thanks to freefalling hard disk prices, you can store a 3000-disc CD collection in lossless format on a single $250 terabyte hard drive.
Once you've ripped in lossless format (and note that I'm not buying a digital download until they come in lossless -- the local used CD shop is cheaper anyway), all you need to do is listen through a top pair of headphones, like those from Koss, Sennheiser, Grado, Shure, Bose and others. (Head-Fi.org has recommendations.) You'll hear a big difference even on a portable player, but for true audiophile action, run the optical audio output from your computer to a good receiver, and thence to your headphones. The quality of the digital-to-analog conversion circuitry matters a lot, and it will be much better in the receiver.
Have some other tips for getting the best sound out of your music player? Or think your MP3s sound just fine the way they are? Tell us in the Comments!