I generally use MP3 (car, iPhone, etc.), but I rip to FLAC for archival purposes. It's nice to know that in the future I can re-convert the music and start from scratch.
Also, I like the fact that I can use FLAC track/album gain on my Squeezebox at home but normalize the tracks for output to MP3 for use elsewhere.
MP3 encoders/decoders have gotten seriously good and if you don't know the songs well it's easy to be fooled. However, if you DO know the music very well it's often easy to tell the difference. It's not worse, really, just different and for people with strong auditory memories it can be a little annoying.
I also listen to a lot of music with significant distortion and MP3 seems to be weak in this area.