Yes. Right out of the box the Palm Pre will already be able to support the following file formats.

Audio:  MP3, AAC, AAC+, AMR, QCELP, WAV
Video: Formats: MPEG-4, H.263, H.264
Image: Formats: GIF, JPEG, PNG, BMP

Advanced Audio Coding (AAC) is a standardized, lossy compression and encoding scheme for digital audio. Designed to be the successor of the MP3 format, AAC generally achieves better sound quality than MP3 at many bit rates.