I was just as skeptical years ago. I had ripped all my music to Apple Lossless and at that time, I had my fave playlists in Apple Lossless on my iPhone 3GS. Most dealers would have the Wadia iTransport that provided a bit perfect SPDIF output to their DACs in the showroom.
I remember having the same CD vs the Apple Lossless rip on the phone playing on the same CDP/DAC (an Ayon CD5S) and the iPhone sounded pretty dismal. I was quite disappointed cos I was sure I could do away with a CDP by then.
A friend who was at the demo asked me if I was using WAV. I said No. He said give it a try. So I went back and did a new playlist with some of the same songs transcoded to AIFF. I preferred AIFF for the ability to store meta data where WAV did not (at least not at that time).
And IMHO there was an appreciable difference between the ALAC vs AIFF on the same Wadia ITransport. The bass was more pronounced and the overall feel of the music felt more "dynamic" or alive.
So I made the switch. I suspect since then, with memory playback and INT modes etc, software players on PCs/Macs may make any differences tiny but that experience showed me there was a possibility of degradation, so I keep my music on AIFF these days. After all, HDDs are cheap. I just got another 6x4TB today.
