Nothing wrong with MP3 so far as I'm aware. You might get slightly better compression using other formats, but in my experience it's usually identical or the difference is too small to bother about. Almost everything supports MP3, too. Some of the more esoteric formats aren't so widely supported.
I guess you're also asking how to rip the CDs: pretty much any music player on a PC/Mac/Linux box has that capability these days. The default settings will work fine, though unless you're an audiophile, you might want to reduce the quality settings from default as that usually ends up producing quite large files for little appreciable improvement in quality (my opinion, YMMV).
Once you've ripped your files, connect your droid to your machine via a USB and simply drag and drop the music files into an appropriate location on the phone.