1. You need two pieces of software: a ripper to extract the individual tracks from a CD and an encoder to convert and compress the tracks to MP3. Below are two of the best and they're both free.

Exact Audio Copy (EAC) is an extremely accurate & full-featured ripper that offers a plethora of features and precise control over the ripping process. EAC double-checks every bit for accuracy against the original; if it finds discrepancies, it reads the data again, and yet again if necessary. As a result, it's slower than other rippers, but your sacrifice in time nets you top-notch quality.
DOWNLOAD: Exact Audio Copy 
(As of the date at the top of this article, the current version is v0.99 prebeta 4, dated 24-Jan-2008.)

The LAME MP3 Encoder is widely acknowledged as the finest MP3 encoder available. There are Stable ("final") and Beta versions.
DOWNLOAD: Free-Codecs.com 
(As of the date at the top of this article, the current version is 3.98.2, dated 24-Sep-2008.)

2. Install Exact Audio Copy. (NOTE: The current version of EAC has an installation routine; previous versions did not and could simply be unzipped into its own directory, e.g. C:\Program Files\Exact Audio Copy.)

3. Unzip the LAME MP3 Encoder file and place the contents in its own directory (e.g. C:\Program Files\LAME MP3 Encoder).

4. On first launch, EAC will start the Configuration Wizard (or click EAC > Configuration Wizard to launch it). The wizard will detect your computer's optical drive(s). Select the drive you want to configure. At the Extraction Preferences screen, select "I prefer to have accurate results" and click Next.

5. If EAC recognizes your drive, the settings for Accurate Stream, Audio Cache and C2 Error Information will be filled in automatically. Select "Use these values to configure this drive" and click Next.
   
   If you select "I don't trust these values, detect the features for my drive," have an audio CD handy. Insert it into your drive and allow EAC to test your drive's error-correcting capabilities. If you have multiple optical drives, EAC will default to what it considers to be the best drive (you can change this in the Options menu later).

6. At the Encoder Selection screen, select "nothing right now, I will configure it later manually" and click Next.

7. At the freedb Configuration screen, enter your email address and click Next.

8. At the Filename Configuration screen, select "Leave naming scheme unchanged" (it should be the default) and click Next.

9. Finally, at the Done screen, choose "I am an expert, let me use the full potential of EAC" and click Finish.

10. Go to the EAC > EAC Options menu, select the General tab, and make sure "On unknown CDs" is checked and that "automatically access online freedb database" is selected (both should be selected by default).

11. Select the Filename tab. Under "Naming scheme" carefully type %A\%C\%N - %T. This will result in a directory structure that creates a folder from the artist name, a subfolder with the album name, and numbered tracks within the album folder, like this: Bjork > Post > 01 - Army of Me.mp3.
    
    For compilations (such as soundtracks) by various artists, make sure "Use various artist naming scheme" is checked. Then enter Various Artists\%C\%N - %A %T into the box below.

12. Select the Directories tab. Choose "Use this directory" and then click Browse and locate the folder you want to store your MP3s in and click Save. Click OK to close.

12. Go to the EAC > Drive Options menu. Select the Extraction Method tab. Make sure "Secure modes" is selected. If the box marked "Drive is capable of retrieving C2 error information" is already checked, leave it checked. But if, after ripping your first CD, you hear audible flaws in the tracks, it means your drive might not report error-correction information properly. If so, uncheck the box. Click OK to close.

13. Go to the EAC > Compression Options menu. Select the External Compression tab. Make sure "Use external program for compression" is checked and select "LAME MP3 Encoder" in the "Parameter passing scheme" pulldown menu. Under "Program, including path, used for compression," make sure the lame.exe file is selected. If it isn't, click Browse and locate the file. The resulting path should look something like: C:\Program Files\LAME MP3 Encoder\lame.exe. Then go to the "Bit rate" pulldown menu, and select Variable Bitrate 192Kbps (more details below). Click OK to close.
    
    Variable bit rate (VBR) encoding raises the bitrate during complex portions of music, and lowers the bitrate during quiet or simple portions. But your MP3 player may not support VBR playback, or your disk space might be limited. In the former situation, you'll still get fine results with constant bit rate (CBR) encoding at a minimum of 192Kbps. In the latter situation, drop down to as low as you can stomach; 128Kbps CBR, for example, is okay if you listen to your music through cheap earbuds.
    
    NOTE: The original article recommended Variable Bitrate 192Kbps and it works well offering a good balance between sound quality and file size. But if you're looking for even better quality and have plenty of storage space, go with Variable Bitrate 256Kbps or Variable Bitrate 320Kbps. And if storage space is of absolutely no concern, go with Constant Bitrate 256Kbps or Constant Bitrate 320Kbps.

14. Go to the EAC > freedb Options menu. Select the freedb tab. Confirm that your e-mail address is correct in the "Your e-mail address" field. Click the "Get active freedb server list" button. Click OK to close.

Now you're ready to make sure all your settings are correct before happily ripping away.

15. Put an audio CD in the drive. EAC should automatically query the freedb server for track data. If it doesn't, press Alt+G.

16. Now click the MP3 button on the taskbar to the far left to begin encoding.

17. When the test run is finished, review your tracks. If they are blank or there are any errors, double-check the settings above. If the settings look good, try downloading the Nero ASPI layer at ftp://ftp6.nero.com/wnaspi32.dll (Your PC can't rip music without an ASPI layer). Place the file in the same directory as EAC (refer to Step 2) and try the test again.

18. If your tracks sound fine, congratulations! You now have a powerful and sophisticated MP3 encoding system.

19. The final step is to save your settings in a Profile. Go to EAC > Profiles > Save Profile. Browse to where you unzipped EAC (refer to Step 2). There should be a subfolder named "Profiles;" if not, create it. For example: C:\Program Files\Exact Audio Copy\Profiles\. Enter a name for your profile and click Save. You should now see the selected profile in the pulldown menu at the bottom of EAC. You can use this menu bar to quickly load, save and create profiles.

Now you're ready to rip your entire CD collection and create perfect-sounding MP3s.

• For Windows 2000/XP systems, EAC will most likely require that you be logged into an account with Administrative rights for the program to function properly.
• Some enhanced CDs have an Autorun feature that opens an application window. Close any such open windows before starting the encoding process.
• For enhanced CDs, do not encode the data track (usually the last track). Select only the audio tracks and then start encoding.
• Double-check track names for typos and other errors. To edit a track name, highlight the track and press F2.

To bring some order and logic to my MP3 collection, I prefer solo artists sorted by their last names (surnames). The common format of the freedb database is firstname lastname, whereas I prefer lastname, firstname. I also prefer the "The" in group names to be appended to the end of the group's name. The common format of freedb is The Pixies, whereas I prefer Pixies, The.  Change the artist name in the "CD Artist" field before you begin encoding and the change will be reflected in both the folder names and ID3 tags.