When your equipment is good enough, the difference in quality is night and day.
If you have any SBLive! or Audigy soundcard (I use an Audigy2 ZS), the drivers natively upsample everything to 48khz. However, this conversion is done in a shoddy manner which introduces a lot of harmonic distortion. I reccomend the
kX Drivers along with either a decent resampling plugin for winamp (uses a lot of cpu resources unfortunately) or the kernel streaming output in foobar2000. Then Creative Labs cards sound as they should. If you aren't interested in gaming performance, I'd highly reccomend that you look to another manufacturer for your sound card.
I use Grado SR80's as my headphones and Klipsch RF-3's as loudspeakers (excellent speakers, unfortunately run through a cheap onkyo amp so they don't reach their full potential) and the difference between 128kbit mp3 and other encoding methods is IMMEDIATELY discernable to nearly anyone I ask. If you use a decent encoder (LAME), mp3 can sound acceptable at 192kbps, especially if its intended target is a portable device. Alt-Preset-Standard sounds excellent, and is difficult to discern from 320kbps. When Fraunhofer was doing initial testing with the codec, the vast majority of their sound engineers could not consistently distinguish mp3 from the original cd when the bitrate was set to 256kbps or higher.
One of the few things missing from high bitrate mp3's is a fully developed soundstage. Joint stereo encoding is usually the biggest culprit in this case, but is a necessity at lower bitrates to preserve quality. I personally prefer the Ogg Vorbis codec, in that it allows higher bitrates than mp3 (and sounds better per bit as well). On my desktop, I keep my music at Ogg Quality 10 which is VBR up to 500kbps, averaging about 464kbps. Only in one or two instances have I been able to discern a difference between that and FLAC, and at that bitrate the ogg files take up half the space of FLAC. For my portable player, I use quality 6 which still sounds excellent and further cuts filesize in about half.
Phew, that was long but I've put a lot of thought into all of this recently. Of course, this is all my opinion. Your mileage might vary depending on your equipment and ears.