MacRumors.com

An LA Times article (registration required) confirms previous rumors of an Apple Music service:

Although no licensing deals have been announced, sources close to the situation say at least four of the five major record companies have committed their music to the Apple service. It could be launched next month.

According to the article, the new service will be enabled through a new version of iTunes and will utilize the AAC audio format (MPEG4). While MPEG4 allows for Digital Rights Management (DRM), Apple appears to be trying to avoid such limitations:

That approach [using AAC] allows the songs to be protected by electronic locks that prevent them from being played on more than one computer. Still, sources say, Apple wants to enable buyers to burn songs onto CDs. That feature would effectively remove the locks.

Previous rumors provided some additional details including a $.99 price point and the use of the "One-Click" system for purchases.

The use of AAC would imply future support for the format in Apple's iPods, and a "next month" launch would correspond to the most recent iTunes rumors.