Only plays atrac3 files, and I believe they have to be recorded from the deck directly onto the stick (cannot be transferred from PC). I just got my MS reader in the mail yesterday so I am going to try and work on finding out a way to do just that, but they will always have to be in atrac3 format. As for recording onto the MS, you can record from aux and radio (including satellite). I believe you can record from original CD as well, but not burned CD or MP3/WMA CD, although I believe I did get the unit to rip a song from a burned music CD once.