To give a perfectly clear answer,
Quote: "but everyone says songs in lower bit rates will suffer because of all the compression"
That is true with MP3s because the compression algorithm is what we call a "lossy" one. Just as Jeku mentioned how an image loses clarity with JPG compression, so does an MP3. If you save an image as a PNG, the file is still compressed but uses a "lossless" compression algorithm to which no data is lost. The sound alternative for that would be FLAC and certain forms of WMA.
While FLAC would have a greater file size than an MP3, you should hear a noticable difference when encoded at 128kbps.
There might be programs that can resample the data and try to fill in some of the missing bits but I'm not aware of any such software.
Quote: "a 128kbps song to 320kbps, what effect would this have?"
You'd have a larger file, that's it, assuming it was an MP3.
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