I could be wrong but I think it's like a CD or DVD. If you're playing it through another piece of equipment the sound(or picture) is only going to be as good as that piece of equipment and it's speakers will allows.
You will lose some sound quality depending on the audio format(mp3, ogg orbis, WMA) and whether it requires compression or is a lossless format. I don't know what format iPODs use.
