It is both. MP3's are considered a "lossy" format because, after compression, you can't uncompress them and get the full fidelity. FLAC (and others like ACC) are compressed, but they don't lose any of the information required to recreate the original. Hence they are obviously larger than lossy types, but are still much smaller than uncompressed formats like AIFF and WAV.
Also, FLAC files can also provide a resolution of up to 32-bit, 96kHz, which is even better than the standard CD!