That one’s easy. FLAC is comparable to ZIP and RAR files. They take up less space, but because the files are generated by using some high-end calculations, they take a while to save. When doing desktop editing, it’s far easier to leave them in the wav (PC) or aiff (Mac) format, and then compress them to FLAC when the editing is complete. Also, while most current music software can play FLAC (the most notable exception being itunes), it’s a lot heavier on the CPU usage than playing an mp3 or wav file is, since it has to uncompress on the fly, while mp3 compression does not. The usage of FLAC has become popular for two reasons - file sharing (since it’s half of the download time - most complete concerts are around 500MB, where if they were uncompressed, they’d be twice that), and long term storage (most 2 hour concerts can fit onto ONE data CD)
Live music and how intrusive the experience is.
However, when you’ve designed and installed a really good (maybe not quite as good as your friend’s, but really good) sound system in a customer’s den and he asks for an iPod input, it does take you aback, and you find yourself begging the A/V gods to stop him before he wants to watch his iPod videos in his home theater with a $30k projector, $200k sound system, and $50k of room preparation. Of course, we’ll do it, for a price that includes not laughing at him to his face.
Actually, it’s us bitter old farts who need really good audio so it still sounds okay once it’s pushed past our hearing loss. 
What I find silly about this all is how many people are so obsessed with the media but not the player.
I listen to music most often in one of two places; the car on the interstate, or at home at my computer.
In the car there is so much ambient noise, that many differences in fidelity are meaningless. At home on the computer I can be slightly more discerning, but even so, the inherent eq and response of my computer speakers ($200 2.1 setup that sounds a-okay to me) makes the difference between formats a wash.
Sitting in front of a decent stereo (which can be had for, say, less than $3,000, speakers, reciever, and CD player) the difference between a 128k MP3 and a CD is apparent. My guess is, though, that for most listeners most of the time, their stereo system (car, ipod earbuds, whatever) are going to degrade the sound so much anyway that it doesn’t matter.
Yeah, but before that he was The Man when it came to audio production. As for his Billy Joel days, well, a guy’s got to do something to pay for his shotgun shells.
I can hear the difference between good vinyl and an MP3, but I just don’t care enough about the difference to pay what’s required to get that better sound.