B&T
Lipids are a type of fatty acids, mostly found in the acrospires (germ of the malt), this is where during malting the rootlet was attached, so its where water can most easily get into the malted barley corn.
If you hydrate the acrospires and the temperature is in the right range (60-70oC peak activity) and there is oxygen around Lipoxygenase will oxidise the lipids and start (or more properly accelerate) the staling process. The oxidation of lipids is one of the primary cause of staling in beer anyway, there is relatively very little O2 in strike water, and lots in air.
Keeping the hydrating water over 80oC helps, industrially they take a variety of measures to reduce the effect, peeling the angiosperm before crushing, hydrating in a CO2/N2 atmosphere, immersion in de-aired water, using steam...
Like many things in brewing, malt conditioning can be beneficial, if you do it properly, do a half arsed job and you will make half arsed beer.
Mark
Edit
Rob W
No, I believe oxidised fatty acids are not volatile, like putting rancid butter in a cup of tea - its a very unpleasant flavour I would go to some lengths to avoid.
M