Many beginners ask questions like "which is best, MP3 or [insert other file format]?" I want to give my opinion and open this up to discussion. However, to answer this question properly, you have to understand basics about digital audio and then what works with most DJ software.
Digital Audio Basics
Here's a quick primer on digital audio from the Wiki:
So there you have it, digital audio is a representation of analog audio that is limited by how the audio is represented. In the usual form of Pulse Code Modulation (aka PCM), audio is represented by a sample with fixed resolution, called bit depth (16bits for CDs), and a rate of samples, called the sample rate. Together, the sample rate and bit depth determine how accurately the original sound is captured as digital audio. At this sample rate and bit depth, stereo sound uses about 605MB per hour. (http://24bit.turtleside.com/pcm.wav.file.sizes.pdf)A digital audio system starts with an ADC that converts an analog signal to a digital signal.The ADC runs at a sampling rate and converts at a known bit resolution. For example, CD audio has a sampling rate of 44.1 kHz (44,100 samples per second) and 16-bit resolution for each channel... The digital audio signal may be stored or transmitted. Digital audio storage can be on a CD, a digital audio player, a hard drive, USB flash drive, CompactFlash, or any other digital data storage device... Audio data compression techniques — such as MP3, Advanced Audio Coding, Ogg Vorbis, or FLAC — are commonly employed to reduce the file size... The last step is for digital audio to be converted back to an analog signal with a DAC.
There are many files formats that contain native PCM audio - WAV (popularized on Windows) and AIFF (popularized on MacOS) are just two popular file formats. The common characteristic of PCM audio is that it is large in size. Back in the early 80s, CDs were created to store and playback PCM digital audio.
In the mid 90s, data compression techniques became popular that to reduce the amount of data being stored in files. Keeping this simple, two major ways emerged. One was to reduce the amount of data and still ensure that ALL of the original data was recreated - called lossless. The other way was to reduce the data, but not mind so much if some of the original data was lost (reasoning that you wouldn't miss it anyway) - called lossy. Lossless would reduce the file sizes up to 50% (302 MB per hour) and sound the SAME as the original recording. Lossy methods could reduce the file sizes by 80%+... but would reduce sound quality at high compression rates.
Through time the two coding/decoding techniques (called codecs) that became very popular were FLAC for lossless and MPeg 1 layer 3 (aka MP3) for lossy. There are many other codecs for both lossless (i.e. Apple Lossless, WMA Lossless, etc.) and lossy (WMA, M4P, Ogg, etc.).
Skipping how it came to be, let's just cut to the chase and state that MP3 is the most popular of digital audio file formats.
DJ Software Context
Music exists as digital audio files in a variety of codecs - WAV, AIFF, FLAC, MP3, AAC, and more. Many DJ applications playback MP3, WAV, and FLAC. Others playback MP3, AIFF, and AAC. Others still playback MP3, FLAC, and AAC. See the pattern? MP3 is ALWAYS played back by DJ apps. For that reason, most DJs tend to use MP3 as their format of choice.
So Which Is Best?
In terms of recreating the original analag audio with minimal data, technically lossless is best. It has the accuracy of PCM when decompressed AND reduced data size when stored. Still, all DJ apps use MP3s as an accepted format.
So what most DJs tend to do is use the highest data rate in the MP3 format - 320kbps Constant Bit Rate MP3. Doing so is the best compromise between file size and audio quality (assuming that the original recording is of high quality).
So now you know... and knowing is half the battle.