FLAC is the "Free Lossless Audio Codec". It's pretty much replaced all the other lossless audio compression formats out there such as APE, Shorten, etc. Preferred file extension is ".flac", but you sometimes see ".fla" to be Windows-ish since many Windows file formats have kept the 3 letter extensions despite the OS supporting longer ones for some time.
There are DirectShow (or whatever MS is calling it now) filters for it.
FLAC is also sometimes seen in other containers such as OGG containers (.ogg, which can also hold Vorbis audio, which is lossy) or Matroska (.mka for audio only or .mkv for containers that have video in them) since Matroska can hold well-nigh anything. With the proper DirectShow filters, WMP can play FLAC in these containers. vlc can also play all this stuff, but then vlc can play just about anything.