The BBC distribute FM around the country in NICAM format, so assuming you can receive a relatively strong FM signal then you're basically hearing NICAM-encoded audio.
NICAM is 14-bit PCM companded to 10-bits using a sampling frequency of 32 kHz (see http://tallyho.bc.nu/~steve/nicam.html). So, not capable of CD-quality, but not too far off it. And although it might appear that its audio bandwidth will be narrower than MPEG audio because of the lower sampling frequency, all digital radio stations in the UK that I'm aware of lowpass filter with a cutoff frequency of about 15.5 KHz anyway, so there's really no difference in that respect.
Radio via DAB, DTT, digital satellite and cable uses MPEG Layer 2 at varying bit rates depending on which platform you're listening to. 98% of stereo stations on DAB in the UK use 128kbps, which sounds between poor and unbelievably dreadful, depending on which station you listen to. Radio 3 is the only station on DAB in the UK that uses 192kbps.
On DTT, the BBC's stations use higher bit rates, with Radios 1-4 all 192kbps, but the commercial radio stations use the same low bit rates as on DAB. There's a table of what bit rates which stations use on the different platforms here:
http://www.digitalradiotech.co.uk/index.htm#bit_rate_table
Since Radios 1-4 went on Freeview a couple of years ago I've usually been listening via Freeview, but I'd noticed that the BBC stations didn't sound as good as they used to on Freeview, and someone emailed me a couple of weeks ago saying that they thought that 192kbps MPEG Layer 2 probably wasn't up to the job of sounding better than FM. So the next day I listened to a load of FM stations and every one sounded better than the same station sounded on either DAB or DTT. Basically, I don't know why I persisted with DTT for so long. I think it's a case of the fact that the vast majority of the audience listens via FM, so they invest more effort into getting their FM stations to sound good. Some (but not all) of the broadcasters invest effort into getting their DAB stations to sound as good as they can, but the bit rates are just far too low to provide good audio quality.
The future of DAB in the UK is basically already decided, and the commercial broadcasters are dead set against increasing their bit rates and they're dead set against the BBC getting any more capacity to increase theirs, so it looks like DAB in the UK will never sound as good as FM does. The BBC has recently installed new MPEG encoders for DAB that were supposed to make a difference, and they did make a difference (they couldn't have sounded any worse than they did), but they still sound very poor because MPEG Layer 2 wasn't intended to be used at 128kbps.
Things might get better when some new technologies appear, such as the BBC iMP (interactive media player) that's going to use 128kbps WMA9, and all new set-top boxes for HDTV will have AAC and HE AAC decoders in them, so in years to come hopefully some radio stations will provide AAC streams. But until then I'm going back to listening via FM and monitor DTT to see if it gets any better.
