Most of us have a collection of digital music files on our computer(s). Chances are you have an MP3 player to take that music on the go. It only makes sense to be able to use the powerful searching and organizing capabilities of the computer to make music available throughout the home. A number of products are available to do this. I just read a review of a music server from McIntosh (the audio company, not to be confused with the Apple computer). The device costs $6000. The good news is that you can obtain nearly the same functionality for MUCH less money. Here are the parts you need:
Computer (Music Server)
This would ideally be a desktop computer which is on all the time. It need not be extremely fast and it doesn't need a lot of memory. It does need a large hard drive, because this is where you store all of your music files. I recommend at least 500 gigabytes. The computer will also need software for ripping the music files from CDs and organizing a searchable database of your music files. The most popular choice would be Apple's iTunes.
Wi-Fi Access Point or Router
Most home music streaming devices operate with the same 802.11g network protocol home networks commonly use to provide internet connectivity to laptop computers. The standard protocol has sufficient bandwidth to handle streaming of uncompressed CD-quality audio.
Client Unit
The Client receives the Wi-Fi signal sent by the Server and converts it into either an analog or digital audio signal. One of the simplest and cheapest Clients is Apple's $99 Airport Express. Apple refers to the music streaming capability as Airtunes. You place the Airport Express wherever you want to play music and hook it up to a stereo system or powered speakers. iTunes software will recognize the Airport Express unit. You select the unit from a drop-down list and whatever you play on iTunes will be sent to the Airport Express. Note that this is a "push" configuration. You can't make any selections or control the music playback from the Client itself.
Some Clients offer more flexibility and control. Slim Devices' Squeezebox costs $299 and offers a display and remote control. It can use its own database software, but appears to also be compatible with Apple's iTunes. However, I doubt you can play protected files (such as files you buy through the Apple iTunes Store) through the Squeezebox device.
Important Things to Consider
Probably one of the most important decisions is the choice of digital format. If you choose MP3 I would recommend no less than 256 kbps. With inexpensive large hard drives I think the compressed lossless formats are best. You get the same resolution as the original CD in typically about half the space. FLAC is a popular open-source format. iTunes has the Apple Lossless Encoder built in. There is no advantage to saving the uncompressed (wav) files.
While the Server can wirelessly stream a perfect digital replica of the original CD to the client, the results can still be less than optimum if the digital data is not properly converted back to the analog domain. You can hardly expect the digital to analog converter in the $99 Airport Express to be of audiophile quality. For best sound quality I recommend a separate digital to analog converter. I've been pleased with Channel Islands Audio's VDA converter. I have the original version, but their VDA-2 is supposed to be even better.
I've just touched the surface of the possibilities. Let me know if you'd like more information!