It doesn't as a matter of fact. The import option only puts the files on the MY LIBRARY so that you can play them from Sonic Stage. Only when you start to upload them do the files get converted (or rather, an Atrac3 duplicate is made). You can also convert them beforehand, but Sonic Stage only gives you the option to covert one album at a time or one playlist at a time, not a mass-convertion of ALL music files on your hard drive.
Therefore my post. I was wondering if there was a program or an add-on which can streamline this process.