Creative has unveiled a new device called the Xmod, which is based upon the company’s X-Fi Xtreme Fidelity audio platform and promises to improve the audio quality of compressed music, such as that purchased from Apple’s iTunes or any MP3 files.

Shaped like a candy bar, the Xmod plugs in between an audio source and stereo speakers or pair of headphones. It works with any portable audio player including the iPod, along with plugging into a computer’s USB port without requiring the use of software. Creative claims the result is “better than CD quality” sound.

Essentially, the Xmod up-converts the audio signal to 24-bit surround. The X-Fi Crystalizer identifies which areas of the audio file have been truncated or damaged during compression. Creative says the technology can “restore” the highs and lows of the music that otherwise would not have been audible.

The X-Fi CMSS-3D component of the Xmod, meanwhile, creates virtual surround sound through speakers or headphones. Because most digital audio included on movie and TV show downloads includes only two-channel stereo, Creative has designed the Xmod to emulate a multi-channel speaker setup. It can place specific voices in the virtual center channel while ambient noise is in the background.