It's not a dumb question! It's actually an important one.
The situation is a little confusing right now because iTunes store music is available (as far as I know) a couple of formats. Some tracks are available only at 128 kbps with copy protection. Others are available only at 256 kbps without copy protection (these are identified as iTunes Plus, and usually cost more). I believe some songs are available in either format.
The differences are sound quality and file size. 128 files are half as large as 256 files, but they have lower audio quality -- though many listeners won't be able to detect any difference with ordinary audio equipment.
You can convert 256 files to 128, if you want to, within iTunes after you've downloaded them. (You might do this, for example, to save space on your iPod.) All you need to do is to change your settings (in "General > Import Settings" to 128 AAC or 128 MP3. (AAC will give slightly better sound quality.) Then you can select the tracks you want to convert, then "Advanced > Create AAC version" or "Create MP3 version," depending on which you've chosen. This will create DUPLICATE tracks with the same tags but at the new audio rate.
If you do this, I'd recommend keeping the original, higher-quality files on your computer, and placing the new 128 files in a separate playlist to sync with your iPod. Otherwise, you may regret later having trashed the originals -- though I suppose you could download them again from the store, since you've paid for them.
This applies also to music that you get from other sources, like imported CDs and music from elsewhere on the internet. 192 or 256 kbps will give you better music quality -- which might be noticeable especially if you've got a high-quality home audio system, or if you plan to burn the music onto a CD. But the extra quality comes at a cost in file size and storage space. Personally, I would go for the quality and, if you start running out of room, buy an external hard drive for your music collection. And another to back it up.