Wii Transfer supports MP3s and unprotected music files encoded with AAC, including the new iTunes Plus tracks from the iTunes Music Store. Because the Nintendo Wii browser does not recognize AAC, Wii Transfer will first process the files and send only MP3 data to the Wii. It does this on-demand as songs are needed, and if you are playing through an artist, album, or playlist in order, Wii Transfer will attempt to process the next track so that there is little or no delay as the next song loads.
Wii Transfer maintains a cache of MP3s that it has converted from the original AAC source files. You can adjust the number of songs in this cache under Music Cache Size in the Preferences dialog. Wii Transfer will automatically delete files from the cache if this maximum is reached, starting with the less recently played tracks.
Your AAC files and iTunes library are never modified. For a list of the currently processed songs and their status, choose Window → Activity.