I ripped a number of my CDs using iTunes' Apple Lossless encoding for maximum fidelity. When I played songs back on my stereo system from my iPod, the music was thin and reedy, but when I played the same music back using iTunes on my computer, the music sounded virtually as good as from a CD player.
I assume that the digital-to-analog circuitry in the iPod is not nearly as good as those on my computer, so the same music sounds much better coming from the computer than from the iPod. Since I like to listen to music while I'm working at my computer, using iTunes on my computer as jukebox source is a no-brainer. Just plug the headphone jack into a high-level input on your stereo. I use a 17" G4 Powerbook; your mileage may vary.
[robg adds: I'm running this hint in order to see what others think: I've never actually used my iPod connected to the stereo, and was curious to see if others have noticed a definite audio quality difference between an iPod and a Mac as the music source on a stereo system. Share your experiences if you've tried both...]
Mac OS X Hints
http://hints.macworld.com/article.php?story=20070629015314102