@91hebasuI'm not a lawyer but have have studied law at university level =)
Here's what the TOS section says:
CONTENT SECURITY
You agree not to *****, circumvent, reverse-engineer, decompile, disassemble, or otherwise tamper with any element of the Security Framework—or to attempt or assist another person to do so.
It's pretty straight forward. The TOS also states that you are only allowed to play media from Itunes "on compatible devices, such as an iPad, iPod, iPhone and Apple TV". So to answer your question; Yes, changing the file format is not allowed since it removes the copy protection.
It is legal to make backup copies but only within the terms of the TOS... that is, you are not allowed to remove the copy protection.
@Number6It is possible to use software like Audacity to remove the copy protection. But even to try to assist someone else in doing this is a breach of contract... Simply stating that it's possible is not illegal ;)