The default download format is MP3, and this is probably what you want. These files play back beautifully in iTunes, Windows Media Player, your iPhone/Android phone, etc. and include high quality cover art, accurate artist and track names, and lyrics. MP3s use variable bit-rate encoding (VBR) to shrink the size of the files while maintaining the highest quality, so you get fast downloads and can fit more on your iPhone.
You can also download in FLAC, ALAC (Apple Lossless), AAC, Ogg Vorbis, WAV and AIFF formats. These options are, as we say in the interface, for "audiophiles and nerds." If you aspire to become either, this isn't a bad place to start.