can listen to a CD at the same time as it is being "saved to the HDD", which kinda indicates that they are encoding at least in real-time, and probably faster.

More likely, the player has some sort of a scratch partition where it saves the raw WAV data from the CD. When you first insert the disc, it rips the WAV data to this partition and begins streaming raw audio from there.

Then, in the background, at its leisure, it encodes the WAVs into the compressed format and deletes the bigger files one by one.

At least, if I were designing such a system, that's the way I'd do it...

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Tony Fabris