Just telling you what the settings page says. It probably just defaults to the maximum quality level. 320kbs may be relevant to other platforms you can download from using Spotiflyer like SoundCloud.

That said I can’t tell the different between 256 and 320 kbs.

I like Vorbis/Ogg, which Spotify uses, because it’s FOSS, but AAC/M4A is just has good, een a bit better at very low bitrates (<=64kbs)

People still use mp3 because, who knows, tradition.

Just burn it to a cd and it brings it back to original lossless quality. Trust me. Let me know if you need more high quality info.