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FLAC is a lossless codec, meaning no audio quality is lost whilst compressing (unlike lossy codecs such as mp3 which throw audio data away), audio compressed to a lossless codec will be decoded identical to the source, think of it as zip for audio. All lossless codecs compress around 2:1 or 4:1 at best, a 3 minute audio track will be around 18 MB.
FLAC is a acronym for Free Lossless Audio Codec, and is a popular open source cross-platform codec. FLAC falls under the Ogg banner (Vorbis, Speex and FlAC). Primarily developed by Josh Coalson.