Lossless all the way here, both in my PC (all of my CDs are encoded with WMA lossless) and AAC Lossless in my iPod, though I have lots of CDs in 320kbps MP3s as well.
I probably wouldn't be able to tell the difference between 320kbps and lossless, but I have the storage (60GB iPod) so it's not a problem.
Anything under 192kbps is unacceptable for me. I can really tell the difference, specially in classical music, when it bitrates go so low.
If storage is a problem, using
Exact Audio Copy and
LAME (LAME-Ain't an-MP3-Encoder, even though it is

) like Schadenfroh said to encode at 320kbps yields some damn good sounding MP3s. I don't believe it's a waste, since it takes up less than 50% of the space lossless does, like Aflac said and 99% of the human population can't really tell the difference, specially since as you get older you lose the ability to higher certain hear frequencies.
What Exact Audio Copy does is create a
perfect, binary identical copy of your CD in .WAV format for you to work on. It can even get perfect .wavs off CDs that are badly scratched (though it takes a while, it's absolutely wonderful. I've gotten perfect wavs off CDs I had already given up on).
You can then use LAME to encode them into MP3s. LAME uses the BEST compression and encoding algorithms out there. Since it is an open source effort, hundreds of people have collaborated into making LAME the best for years now, including many audio engineers and musicians. LAME is console based, and that can be tricky for newbies, but there are some nice front-end GUI for it that make it much easier to use, like
RazorLAME EAC+LAME is a bit like the best of both worlds, provided you are willing to take the time it takes to rip+encode your albums with this method.