I still buy CDs, however I mostly buy them used. The problem I keep running into is my musical tastes are always exploring music that can only be "imported". I absolutely refuse to pay $30 per CD. The artists that I cannot buy locally get downloaded.
I also still buy other formats, mainly LPs and 8-tracks. I rarely buy cassettes anymore unless it's something rare.
As for MP3s, I usually encode my own. 224kbps is my happy medium for bitrate. Its' not the space-consuming 320, but it's not the watered-down sound of 128. For downloading artists that are hard to find, I'll take what I can get.
Some recent albums I've bought:
Honeymoon Suite - Clifton Hill (brand new)
Romantics - What I like About You
Green Day - Shenanigans
That Dog - Totally Crushed Out
Frente! - Labour of Love
Some that I recently downloaded:
Shampoo - Absolute Shampoo
Hollies - Confessions of the Mind
McAuley Schenker Group - Perfect Timing
Altaria - Divine Invitation