CDex can extract the data directly (digital) from an Audio CD, which is generally called a CD Ripper or a CDDA utility. The resulting audio file can be a plain WAV file (useful for making compilation audio CDs) or the ripped audio data can be compressed using an audio encoder. Many encoders are supported, to name a few:

Lame MP3 encoder
Internal MP2 encoder
APE lossles audio format
Ogg Vorbis encoder
The Windows MP3 encoder (Fraunhofer MP3 encoder)
NTT VQF encoder
FAAC encoder
Windows WMA8 encoder