I think it's a pretty interesting question that gets a lot of people riled up in the audio world. Most of the arguments I've seen for FLAC sounding better are purely anecdotal. I've never seen a study saying that one is actually better than the other. What does Facepunch think?
For those who don't know.
FLACs is a lossless format often at 700+ kbps, which hold all of the song uncompressed. MP3s is lossy format that holds compressed audio usually anywhere between 120-320kbps. Lower bit-rate mp3s are usually pretty easy to tell from higher bit-rate ones. A lot of people would say that MP3s with less than a 100kbps have very apparent artifacts (artificial sounds as a result from compression), once you get towards the higher bit-rates the difference between compressed and uncompressed lessens. Though, in the case of the argument, FLAC users will say they can hear the effects of compression even at 320kbps.
Here's a nice video explaining how MP3 works, it includes some ABX testing, if you're interested in how that works.