It's true that once you make a CD from files you download from iTunes you could in effect rip that CD into MP3s of your choice (although you'll lose quality in both directions of that transfer) and then you'll have mp3s that you can play in any device and copy and trade with friends to your heart's content.
Choop, I understand that most albums suck and often you'll want only a single song from an entire album - and with CD singles being a thing of the past, there's even more of a compelling reason to offer a service *like* iTunes - my point is that iTunes has several barriers to true usefulness: cost, quality, selection (which will improve over time, of course), and that stupid need to restrict the use of those files you just paid for.
Remember when Napster was going to come back with a pay service, but they were going to use a proprietary audio format (the .nap files, loosely based on wma) and the consumers scoffed?
Well, two years later Apple tries the same thing and people just go apeshit. Why? Apple's marketing is better than Napster's was.
Don't believe the hype, people.