MKV and FLAC are often a perfect match
FLAC is a common sound format inside MKV files. Concert videos, music documentaries, anime from Blu-ray and many carefully made film backups store their audio as FLAC, because it keeps the full quality of the original disc in less space. When you convert MKV to FLAC and the track is already FLAC, choose Original audio: the track is copied out unchanged, in moments, with every sample intact.
Other lossless sources
Some MKV files carry other lossless or uncompressed formats, such as PCM, Dolby TrueHD or DTS-HD Master Audio from Blu-ray discs. When these are decoded and stored as FLAC, nothing is lost either, and the FLAC file is usually much easier to use. Almost every music player and editor reads FLAC, while few programs outside video players can handle TrueHD or DTS-HD. The input list shows the codec and number of channels, so you can see what you are working with.
When FLAC is not worth it
If the MKV sound is lossy, such as AAC, Dolby Digital, DTS core, Opus or Vorbis, a FLAC file keeps the decoded sound exactly but cannot restore detail. The file will be several times larger with no audible gain for listening. Then a lossy format is the better choice: MKV to M4A can copy AAC without loss, and MKV to OPUS can copy Opus. FLAC still makes sense from lossy sources if you plan to edit the sound many times.
Compression level
The level controls only how hard the encoder works to make the file small. Level 0 is fastest, level 8 is the smallest. The difference is usually a few percent, and the sound is the same at every level. For a copied FLAC track the level does not apply, because the original data is kept.
A concert, song by song
Long concert files are easier to enjoy as separate tracks. Extract each song with its own start and end time in Trim & tags, give it a title, and use the same artist and album for all of them. Take the cover from a frame of the stage. FLAC stores these tags reliably, and players such as foobar2000, Kodi, Plex, VLC and Android music apps show them. On iPhone and Mac, FLAC plays in the Files app and VLC, but the Music app does not import it; for Apple editing, MKV to AIFF is easier. Nothing is uploaded at any point.