Well I guess that's up to you.
Some hifis with USB contain encoding chips, so they could make mp3s from your CDs and put them on a USB flash drive you stick in.
Most others (including the one I have... some cheapish Hitachi that actually sounds quite good) just play mp3s from a flash drive.
Note that the hifi in this latter case will likely only see mp3 files directly on the flash drive (and maybe in some folders too). iPods won't play, because they store their music files in special places that the hifi won't know where to look. Cheaper mp3 players just stick the files on the drive though, so these will play. For an iPod, get a headphones to phono cable, and stick it in the AUX.
Personally I've never used the flash drive. I didn't buy it for that purpose though, it just came with the unit.