I've been doing this a lot lately.
You can specify the location of the converted file
You can choose to replace the file you are converting with the converted file, or you can choose to keep both.
First, select the tracks you want to convert.
You can then right click over the selected files and choose Library Tools > Convert Format
In the left Navigation panel, you'll then see a Convert Format panel. Select Options
This is where you can specify the destination of the converted file.
Here is my use case:
I want to convert high resolution files and M4A files in my iTunes library to FLAC format no greater than 96/24 and write the output to an external disk I will then use in my car. This means that 44.1/16 M4A files are written out as 44.1/16 FLAC and any hirez DSD or FLAC I have will be written out to 96/24.
My OPTIONS:
Convert to this folder: /Volumes/external_disk/path
NOTE: My path does not include the album name. It ends with the parent folder that represents the artist
Checked box to "And create levels of folder structure" : 1 (this will create the album folder)
Mode: Leave the original file; do not add destination to library (This will leave my main library untouched)
Checked box to apply DSP settings. (This is where I have setup all input sample rates at 176.4 khz or greater to an output of 96 khz.
You may have a different use case than mine and you'll have to play around with these settings, but these are the only settings relevant to your question.
Have fun!
Jerald