Compressed lossy files eliminate some digital information that is not entirely necessary to deliver sound. They have the vast majority of the original data, but not all of it, which is where the lossy name comes from. These files are useful for downloading and streaming because they are relatively small. Most music files are some kind of compressed lossy format. Compressed lossy formats include AAC, WMA, Ogg Vorbis, and MP3 files.
If you’re creating a file to be used on a Mac or Windows desktop, you can get away with a lossless file. However, if you’re working on a project that’s going to be streamed onto an iPhone, a lossy file is going to offer a better user experience.