X264 | Bluray

However, be wary of low-bitrate x264 encodes (under 5 Mbps for 1080p). Those turn the beautiful Blu-ray source into a blocky, macroblocked mess. The codec is a tool; the skill of the person setting the switches matters more than the label on the file.

If you care about grain and lossless audio, buy the disc or download the REMUX. If you care about fitting 200 movies on a 2TB hard drive, x264 is your best friend. bluray x264