Robin wrote:So, even if I'm recording 8-bit chiptune (eg LSDJ), I still need a high bit rate mp3 for it to sound good?
Robin wrote:No sure what "lossless" means. I've been saving my work as mp3 from WavePad. Should I save it as .wav?
The 8-bit term is a little misleading. It generally refers to the CPU architecture of the platform rather than a meaningful summary of the programmable sound generator's capabilities. Even if the PSG has a totally 8-bit architecture - the Game Boy does not, as much of it is 4-bit - the sound is eventually converted from purely digital information into an analog output.
When you're using your computer to record audio from your Game Boy you are taking the analog waves that the Game Boy outputs and converting it back into a digital format; with WAV files, it's stored in the form of PCM samples. This WAV file stores the amplitude of the incoming analog signal as measured at a regular interval, such as 48kHz. In this form, the data is uncompressed and "raw". This does not mean that it is a perfect reproduction of the input signal - the bit-depth and sample-rate, as well as the components of the physical hardware you're using to record the audio, will determine how close to the input signal you can get - but a 24-bit WAV file at 44.1kHz or 48kHz will sound very close to the original.
Unfortunately, stored in this format, files are quite large. Compressed formats exist to ease this issue. The mp3 format is a compressed audio format that allows for much, much smaller file sizes. The downside is that the mp3 format is "lossy", meaning that some data is thrown away from the original to make the file smaller. This will generally make an audible difference between the raw and mp3 version, but the mp3 format aims to minimize this issue by being a little clever about what it throws away. Higher bitrates here will sound closer to the original than lower ones, with 320 kbit/s being rather good and 128 kbit/s being rather bad.
A middle ground exists in formats like FLAC. Unlike raw formats, FLAC is compressed and is therefor a more manageable size, but the compression is done in such a way that the original data can be perfect reconstructed from the compressed data. The downside here being that the format can't achieve sizes as small as lossy formats and it's less widely known and supported than the ubiquitous mp3.
TL: DR;
The mp3 bitrate affects how closely the resulting audio will sound to the original. When internet speeds were slow and hard drive space was at a premium, low bitrates had their place, but there's no excuse nowadays to use anything but 320 kbit/s (the maximum for a standard mp3).