Do more with iTunes convert and import feature
You may already know about iTunes’ Advanced -> Convert Selection menu item. This menu item lets you convert an item in your iTunes library from one format to another. The exact wording of the menu item depends on your iTunes import settings, as seen on the Importing tab of the Advanced panel of iTunes’ preferences. If you have Import Using set to AAC, then the entry in the Advanced menu will read Convert Selection to AAC. Change your preferences to use MP3, and the menu item changes to read Convert Selection to MP3. (The Convert Selection option is only usable when you have a song selected in your library or playlist.)
The Convert Selection menu item, however, has a couple of additional tricks up its sleeve. First, you can use this menu item to convert and import music files in other formats that are not presently in your iTunes library. How? Just hold down the Option key before selecting Convert Selection (you can release Option once you’ve activated the menu). When activated with the Option key down, Convert Selection to AAC (for example) becomes Convert to AAC…, with the three dots (ellipsis) indicating that OS X will present a dialog before executing this command. In this case, that dialog is the standard OS X file selection dialog; navigate to the file you’d like to convert, click Open, and iTunes will convert the file to the chosen format while importing it to your iTunes library. The imported song will be found with the rest of your music, in your iTunes folder.
The second trick for this menu item is actually within the first trick—find the file you’d like to convert in the Open dialog, then press and hold Option key before clicking the Open button. If you do this, you’ll immediately see another file selection dialog. This second dialog can be used to override iTunes’ default storage location for the converted file—it will be stored at the location you specify in this second dialog, instead of within your iTunes folder. (The file will still be added to your iTunes library; it just won’t be stored in the default location.)