Wave is a container format, that is it can contain many types of audio. Most common is uncompressed (PCM), in addition compressed audio can be stored using one of the many ACM codecs.
Compression Options
Uncompressed creates a standard PCM wave file, uncompressed is much larger than mp3 (10x) and larger than lossless files (2x). Setting bits, channels and frequency to [as source] ensures the wave file matches the quality of the source.
Compressed, click Settings to choose from installed ACM codecs.
Wave-Mp3, creates a mp3 compressed wave file, using the Lame mp3 encoder.
Codec Background
Wave was developed by Microsoft and IBM, using the RIFF 'chunk' container format. Majority of Wave files are uncompressed PCM, however can also store compressed audio (requires a system ACM codecs to decode).
ID Tag Details
Wave files can store a limited choice of fields in a Wave LIST chunk, or the full range id ID Tags in an 'id3 ' chunk (which is an id3v2 tag).
By default both types of tags are written for maximum compatibility. Not all programs can read these chunks.
Terminology
Encoding: compress and write audio track, Decoding: uncompress and read the track, ID Tags: meta data such as artist & album are embedded inside the audio file, Lossless: compression without audio quality loss, Lossy: audio quality is sacrificed (how much depends on bitrate and codec used) to achieve smaller files, Gapless: allows the decoder to decode audio stream without gaps (silence).
