FLAC stands for Free Lossless Audio Codec, an audio format similar to MP3, but lossless, meaning that audio is compressed in FLAC without any loss in quality. This is similar to how Zip works, except with FLAC you will get much better compression because it is designed specifically for audio, and you can play back compressed FLAC files in your favorite player just like you would an MP3 file. iTunes does not support FLAC playback. Click here for a list of programs that do!
For more information, visit http://flac.sourceforge.net/