WAV is for sound effects, like gunshots, footsteps, etc. This is because it is uncompressed, so it can play faster and also less CPU intensive (important for a game with lots of simultaneous sounds playing). For music, you would use MP3. This compresses a lot better, and will work for streaming (for example for long 5 or 10 minute audio clips). There is more CPU overhead, but aside from that it is more optimized. OGG also works for music. I think OGG has slightly better compression, but otherwie it is almost the same as MP3 in terms of quality.
