Can you tell the difference between CD quality music and compressed MP3s? Its hard if you're not listening to two of almost the same quality. But here's a simple test that can prove whether or not you're storing your music in lossless. After all, you've got to have a lot of drive space to do just that, better be sure.
Technically, MP3 is lower quality, since it's lost data from its original format. But there are many audiophiles that can tell you can will be able to tell the difference between the two. Except, its tough for the human ear to tell them apart.
Storing your music in a lossless format has its own advantages. To tell the difference, an ABX test is the best way. An ABX test is essentially a way of comparing two known files (the lossless A and lossy B) and two unknown files (X and Y, which are the same as A and B, but you don't know which corresponds to which).
After repeating this about 10 times, you count up how many times you were right—and if you didn't get a score of 95% (or in this case, 9 out of 10), you probably can't tell the difference.
Or you can use Windows favorite foobar2000 actually has an ABX plugin that makes the process easy. Check out the video at the top of this post to see how the plugin works.