In our house, the answer has turned out to be "both". I rip to FLAC on the Olive music server because I want highest quality (and I have the room). My son rips the same CDs in MP3 format for Itunes/Ipod. The iPod doesn't support FLAC, and in any case, he wouldn't be able to store enough songs. Since we have the CDs and the ripping process in both cases is very simple, I haven't worried about "converting" from one to the other, which sounds good in theory, but which at least for us would be too much trouble.
On the other hand, if these are one-time downloads, or if you plan to get rid of the source CD (or LP) after you rip it, then I would go with a lossless format and deal with conversion later if need be. You can always convert "down" but you can't convert "up".