Apple is currently working on a new file format for its iCloud service, according to reports.

Writing for The Guardian, Charles Arthur cites sources with “inside knowledge” and claims that Apple is set to bring a new format to the music world which will allow for adaptive streaming of music from iCloud, with the quality being altered depending on the playback method.

Apple’s iTunes in the Cloud and iTunes Match both rely on music being stored on servers owned by the technology company. Being able to alter the music quality as it is being distributed could potentially save in bandwidth costs for the end user…

The potential is that Apple may serve a high quality track to users who wish to download their music to devices such as iPhones and iPod touches. A lower quality, streaming version could also be made available to those who wish to listen to music as it is streamed from Apple’s servers, straight to their devices. The drop in quality would allow 3G streaming to be used without the possibility of large data bills or a poor experience due to lack of bandwidth.

Arthur’s anonymous source believes that Apple’s music would move from AAC to “HD” in an instant, with users not having to make any changes on their end – everything is done on Apple’s servers as that is where all the music files live.

Obviously Apple refused to comment when questioned, but the potential is that the new adaptive audio files could be part of the iPad 3 announcement, expected to come in early March. Increased iCloud service could also be part of the announcement.

Would you welcome new, “HD” audio? More importantly, what exactly is HD audio?