PS1 was still using FM synth for the most part, so it was pretty much a MIDI track telling the audio hardware what to play back in real time. The CD is basically just a recording of that.
PS2 tended to use pre-recorded music compressed down to low/mid-bitrate MP3/MP2 or an equivalent. Yes, a CD recording of that could be better, or it could just be a recording of the already lossy MP3. It depends on which source the CD originated. For the most part though, there are very few non-Xenosaga/non-Square games that had soundtracks worth a damn on the PS2.