Can someone give Lossless Music File 101?

I got little confused with different ways to make lossless music files and the names/types, and the tools, what is the actual file extension etc...

Is there a link that explains about the topic or can sombody here give some short lossless 101 lecture?

A few things I here a lot are 'Apple losslss', 'FLAC', 'Wave file', 'EAC', 'WMA lossless'

I get confused.
Are you trying to do this for a PC based archive? Or an iPod or something? Do you have a preference for interface? iTunes?
A good source is Wikipedia Here
Here's a little primer...

WAV and AIFF are "wrappers" for PCM data, the first generally used in PC environments and the latter in Mac. This is, in effect, a "raw" CD data file. Since these are just wrappers, they don't have a lot of added stuff, like tags, and they are unprocessed--not compressed at all.

There are two kinds of compression. Lossy and lossless. Lossless is just that--a reversible process whereby the original can be recreated bit-for-bit. Lossy involves more severe compression and the elimination of data that coders believe is not as audible.

FLAC and Apple Lossless (ALAC) are both compressed, but lossless, and have the benefit of supporting tags. WMA is the new standard for Windows media, supporting DRM and stuff. Seeing a .wmv extension on a file is like seeing a .m4a extension--.m4a may be an ALAC, or it may be a severely compressed AAC (lossy compression). Seeing .wma may be lossless or it may be mp3-like compression.

In other words, not all .m4a or .wmv files are lossless, so you really need to confirm what you are ending up with. But, at the end of the day, lossless should be, in fact, lossless. Just a smaller file size.
What are Tags and what do they do?
My setup is 'PC USB -> M-audio Transit -> Toslink -> Meridian 561M processor'. Trying to find best way(sound quality, easy of use, compatibility, etc) for using my PC as a CD player.

I might try itunes first
As far as sound quality goes, might look up some posts by Audioengr, I think he mods Transits to improve the clock, and I gather Transits take modding well. I personally dislike toslink, so you might get him to install a coax output instead too. ;)

Personally, I use a Waveterminal U24 USB audio device, but I gather from another thread that they discontinued them. :(

As far as the other parts, many will recommend foobar as a great player, and indeed it is. Unfortunately, foobar doesn't like Apple Lossless and I find the interface a bit non-intuitive. Apple does great UIs, so I'm sticking with iTunes.
Tags are defined in the file structure for certain information associated with the music data (usually a song). Standardized tags include Album, Artist, Genre, Track Number, Release Date, Album Art, Last Played, Rating, etc. Helps one organize music files...