I have a collection of files in both formats and can’t detect any difference between them as regards their sound quality. There are differences in the size of the files encoded in these formats which relate to the encoding level selected. I’m not going to go into the technical details of that process because there are plenty of other places that do – plus it kind of goes over my head 😉
However, I have a preference for the .flac format because it has better support for file tags. These are very useful for naming files within your audio player of choice – just like ID tags do for the .mp3 files you import into Winamp, iTunes or whatever.
You may also find some files offered in Monkey Audio (.ape) format. I haven’t got any of this type in my collection but only because I’ve never seen the format offered by any of the online trading sites I use. I’m therefore not sure how accepted they are within the trading community.