IIRC, the sound you lose is at the frequency that the normal human cannot hear. Which is why MP3 is now much more common in video games with MIDI close too.

From Wiki:
It provides a representation of sound within a short term time/frequency analysis window, by using psychoacoustic models to discard or reduce precision of components less audible to human hearing, and recording the remaining information in an efficient manner. This is relatively similar to the principles used by JPEG, an image compression format.