It's pretty open, really. Only .ogg and .wav are supported of course (other formats are unlikely, since ogg is pretty much the best free choice; note that mp3 is not free). Between them, ogg is pretty much inferior to wav, since it gives better filesize. Some would argue that wav has potential for high quality, but to achieve this high quality creates not only a very large file, but Glest can have issues when the sound files are too large. Best to keep things minimalized.
As for naming conventions, it's generally best to ensure that all file names contain only lowercase ASCII characters and no spaces (use underscores and dashes instead). Linux is case sensitive, while windows is not, thus the need to be all lowercase, to prevent potential bad links.
