Also, if you want to get Exact Audio Copy set up perfectly once and for all, check out
Chris Myden's article on the subject.
Now, let's talk about compression: First, you need to find out what formats your DJ software will support. The most likely scenario is that it will just handle MP3, but there's a chance you can use another format, or even a lossless compression (just think of exactly the same audio as from the CD, but at bitrates of around 800kbps).
When you're DJ-mixing, you tend to do equalizing and cutting of frequency bands; these operations can make an otherwise perfectly-good MP3 sound strange. The MP3 encoder assumes you will listen to the unaltered sound, but when you remove certain frequencies, some of the hidden defects in the MP3 file will show up.
Equalizers might make the sound imperfect, but advanced processing, such as voice removal, is almost guaranteed to make an MP3 sound like crap. If you intend to use this kind of effect, you really should either do it before encoding to MP3 or not encode in the first place, and play the original file (either as .wav format or as a losslessly-compressed file).
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Okay, so let's say you're set on using only MP3 files for your DJ software. The next challenge is picking what settings to use for your MP3 encoder. Picking the encoder isn't hard; pick Lame
Your DJ software may be able to support VBR (variable bitrate) MP3's properly, or it may not. Some DJ software can't accurately seek within a VBR file. If your software can hand VBR, though, then encoding all your songs with the command --alt-preset standard or --alt-preset extreme should give you excellent-quality MP3's to work with.
However, if you're restricted to CBR (constant bitrate) MP3's (128kbps, 160kbps, 192kbps, etc), then you'll want to use something like --alt-preset cbr 192.
If you can handle the high bitrate, I recommend --alt-preset insane. It gives 320kbps CBR MP3's, which may be too large for you to store on your DJ system, but they're guaranteed to work in your MP3-based DJ software since they aren't VBR, and the resulting MP3's should have enough extra information to still sound great after you've run the sound through some equalizers or filters.
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Okay, I've given you way too much information here, and the chances are some of it went over your head because you haven't wasted years of your precious life studying MP3 codecs

If you scan through the site, though, you'll find all the information you need to get your recordings sounding their very best.