The issue of popular music's "loudness war" flared up again today as Slashdot covered an article in the IEEE's Spectrum magazine on the topic. The war, in case you're unfamiliar with it, is between the record companies for whose songs stand out the most when playing on the radio. People naturally pay more attention to a louder song than a quieter one, so record companies have had the recording engineers pump up the average volume to the point where there's very little difference between the loud parts and the quiet parts—it's all just loud.
While this may grab your attention a bit more as you listen to the radio, the drawback is that it sounds like junk when compared with a normally-equalized recording. There's an excellent short video on YouTube demonstrating how pumping up the loudness destroys the quality, making for distorted audio and a fatiguing listening experience. The problem is so bad that many music enthusiasts stick with records instead of CDs because the relatively limited signal-to-noise ratio of records doesn't let recording engineers pump up the loudness as much as they can with CDs.
This isn't to say that amped up music mixes aren't useful. Many folks listen to music on the go—in the car, while running, etc. In these environments the high ambient noise easily drowns out the quieter passages, and you either have to continuously twiddle the volume control up and down, or just imagine the quiet portions you can't hear.
So, what could iTunes do about the loudness problem? While it would need help from the recording companies (yeah, I know, fat chance), let's dream:
Assuming that we could get the record companies to sell music that isn't amped up, iTunes (and iPods/iPhones, for that matter) could pretty easily re-equalize on the fly to pump up the overall volume. This would be handy for listening while in noisy environments, and while the programmatic loudness might not be what a human engineer would do in every case, it'd be good enough. (Remember, it still sounds bad.) However, once you get to a quiet place where you can really listen with quality speakers or headphones you could turn off the loudness and enjoy the full dynamic range and quality.
(iTunes already has a crude implementation of this with Sound Check. Unfortunately, though, Sound Check only measures the peak amplitude and then adjusts the overall volume based on that value. This causes mostly quiet songs that may have a single loud note to end up much quieter than a song that's more even in amplitude throughout. iVolume and AACGain are a couple of third-party options that use a more sophisticated approach and show that automated processing is feasible.)
The record companies could still send amped-up versions of the songs to radio stations in an attempt to grab ears, and consumers could have multiple equalizations of the song as appropriate for the listening environment. Sounds like a win-win situation to me.