[DreamTactix291]

AAC

AAC stands for Advanced Audio Coding. It is an MPEG standard that was designed to be the successor to layers I-III. AAC has some big businesses backing it and it is also gaining momentum. The biggest reason for this is that Apple supports it on their iPod and their iTunes store sells it's music in DRM'ed AAC only. AAC is both and MPEG-2 and MPEG-4 standard. There are many flavours of AAC which I'll get to a little farther down. You almost always see AAC muxed in an .mp4 container (Apple's .m4a is the same thing)

Good AAC encoders: Nero, Quicktime/iTunes (CBR and ABR only though)
Decent AAC encoders: Coding Technologies, FAAC (only open source one I know of)
Bad AAC encoders: Too many old bad AAC encoders to remember. A lot of the original ones were really simple and the quality left much to be desired. This has changed however.

The two major competitors for best AAC encoder are the Nero and Apple's Quicktime encoders. The Nero encoder supports LC-AAC and HE-AAC, while the Quicktime encoder supports only LC-AAC at this time. Apple has announced HE-AAC support will be added soon, but the question is how soon. Nero has several VBR presets while Apple's is CBR only to my knowledge.

Like Vorbis, AAC does not have fixed frame bitrates. I believe there is a lower and a higer limit but I'm not sure. I've never seen an AAC file fall below 3kbps during silence, so I'd guess that to be the lower limit.

AAC has many different variations created for different uses

Profiles(MPEG-2)/Object Types(MPEG-4)
LC / Low Complexity: The most common version of AAC to be used with mid to high bitrates.
Main: Slightly more complex than LC. Much more rare though.
SSR / Scalable Sampling Rate: Able to scale down for streaming. Of lower quality than LC though.
LTP / Long Term Prediction - only in MPEG-4 AAC: LC with predictors. More rare than LC.
LD / Low Delay - only in MPEG-4 AAC: Designed for use in telecommunications. Lower quality than LC.
HE / High-Efficiency - only in MPEG-4 AAC: Designed for low bitrate usage. LC AAC with Spectral Band Replication.
HE + PS / High-Efficiency + Parametric Stereo - only in MPEG-4 AAC: Same as HE but with parametric stereo. Designed for extremely low bitrates, i.e. 24kbps - 32kbps.

AAC muxed in an .mp4 (or .m4a) container uses tags that are taken from Apple's .mov container. Unmuxed AAC can be tagged like mp3 with ID3v1, ID3v2, or APEv2. MPEG-7 I believe defined a set of standard tags for use with AAC but I don't believe they are in use yet.

AAC isn't Apple's proprietary format like many people believe, but they have a lot of money in it so they back it a lot. My personal preference is the Nero encoder, but the others are worth mentioning.

Currently AAC encoders at best match LAME at the same settings. AAC has a long way to go before it's optimised like mp3 has been.