For music format for a compilation, just know that in .WAV, you won't loose any sound quality from the original music files. MP3's won't sound as good however if you convert to MP3 files and set them for 192 kbps or higher, you won't hear too much of a difference compared to a wave on regular everyday speakers. 128 kbps or lower though and you'll hear a big chunk of 'meat' missing on the overall sound.
For downloading music legally, you should first decide whether you want a pay-per-song / album site, or a music subsciption service where you usually pay a monthly fee (roughly $12-$15) and have unlimited access in most cases to the site's complete library of music of millions of songs. You might want to think of how many songs a month you download, figure $1 a song at a pay site, and see which would save you money in the long run.
If you are seriously interested in a download site or service, feel free to check out my site where I compare legal music download sites with complete reviews (including Amazon which was mentioned above), a comparison chart, you name it:www.comparemusicdownloadsites.com
To save you time though, if a music subscription srvice interests you, you can check out Rhapsody. These guys are at the top of our list, followed by eMusic and then Napster which took a huge turn since the Metallica days and really have a great service going right now.
All the best!