I’m doing this now.
I found Exact Audio Copy (EAC) is the best (it’s free too).
I found mp3tag works great for tagging and renaming things (of course it’s free too)
I use mp4 format, which has a file extension of .aac, .mp4 or .m4a (among others).
After much reading the concensus seems to be the Nero codec is best to convert your CDs into mp4, (though iTunes is rated second and I can’t tell the differece). Nero also has a free version of a the mp4 codec.
So I would get EAC, encode it with Nero (you can use Nero’s codec with a command line on EAC) and then use mp3tag, ,if you want to play with the tags.
This page from Hydrogen Audio Forums shows you what you can use.
Basically it’s up to you. Once you get above 192 variable bit rate (VBR) in mp3, it becomes harder and harder to tell the difference from the CD, that’s up to you. The aac (mp4) codec is better and you can go to around 128VBR to get a similar sound to 192VBR in MP3
In additon to EAC I would also download, Audiograbber and CDEx (which are also free rippers). I found that EAC works best and when EAC tells you the track is right, it is correct. However a few CDs I had EAC wouldn’t rip. I also would only use the normal mode on EAC to look for errors. I never found that using more than that has given me a usuable ripped wave.
I did find that Audiograbber and CDex (I use them in that order) are able to rip songs from CDs that EAC won’t rip or if EAC rips it, it puts silence in the parts it can’t read so you get distortion. (EAC will tell you where it does this).
I just ripped something with Audiograbber that EAC couldn’t get a good file on. The wave sounds great.
Ironically I found for audio books I tried ripping one on EAC, Audiograbber AND CDex and none of them could do it, so I ripped it as a last resort on my Windows Media Player and it worked beautifully. Just shows you never really know.