I believe that, (possibly only) in the early days, it offered to add any imported music to your library, which I think it indeed did by converting to AAC and putting in a directory structure of its choosing.
It probably could convert to AAC, but the biggest issue for collector nerds with carefully curated collections of mp3's organized in folders by artist and album and with perfect metadata was that iTunes would take all your hard work, shake it around, rename all the files and dump them in a single folder and fuck up your metadata. At least that's how I remember it, but it's over 20 years ago ...
It probably could convert to AAC, but the biggest issue for collector nerds with carefully curated collections of mp3's organized in folders by artist and album and with perfect metadata was that iTunes would take all your hard work, shake it around, rename all the files and dump them in a single folder and fuck up your metadata. At least that's how I remember it, but it's over 20 years ago ...