“However… AirPlay streams music in Apple Lossless format. What this means is that no matter what format your music is in, it gets converted by OS X – not by iTunes – to Apple Lossless, to ensure the highest quality,” McElhearn reports. “So lossless files will be streamed as lossless, as will AAC or MP3 files.”
“High-resolution files will be downsampled to 16/44.1,” McElhearn reports. “Interestingly, the Apple TV outputs audio in 48 kHZ, most likely because this is 48 kHz is the standard for movie and TV audio. Movies sold by the iTunes Store contain audio at 48 kHz, but only at 160 kbps.”
Read more in the full article here.