Best known for its association with Apple's iTunes and the iPod range of music players, AAC is actually the follow up to MP3. It addresses a number of the fundamental weaknesses with the MP3 format, some of which are outlined above. It was developed by a number of groups, including the German company, Fraunhofer (the firm behind the original implementation of MP3), Dolby, Nokia and Sony. It was launched in 1997 by the Motion Pictures Experts Group as part of the MPEG-4 specification.
The new codec introduced more flexible joint stereo coding, simplified the way in which the original signal was split up into separate frequency bands, and added a number of new techniques to the music encoder's toolbox. A number of other features are intended as an improvement over MP3 too, including the ability to handle higher sample rates, many more channels (up to a maximum of 48), and better handling of audio frequencies above 16kHz.
AAC, however, is another patented file format and developers have to pay a fee for its use, though distributors of streamed content do not have to do so, so it's a more tempting proposition for streaming Internet radio stations, for instance. And, despite its superior feature set and sound quality at low to high bit rates (see below), AAC has limited support among non-Apple digital music players.
So how do you encode using AAC? Well, the obvious thing to do is use iTunes - that's what I've done here for the majority of the listening tests, since it's the most widely available and well-known of the encoders, but this isn't the best. Notably, encoding using the VBR facility doesn't result in truly VBR-encoded files, but ones that have been encoded using the specified bit rate as a minimum level of quality, which kind of defeats the object of more efficient storage by not allowing the encoder to drop the level of quality when needed - iTunes 'VBR' files, more often than not, end up larger than their CBR counterparts.
Nero's AAC codec is by far the better option, and as well as implementing VBR correctly it also allows the use of HE-AAC (high-efficiency AAC, otherwise known as aacPlus v1), a version of AAC that is optimised for low bit rates and audio streaming uses another technique called Spectral Band Replication. HE-AAC is targeted at streaming audio applications and mobile phones. The new digital radio standard, DAB2, uses AAC+ instead of the obsolete and poor quality MP2 signal currently used by most DAB stations today. The latest BlackBerry handhelds, among others, support HE-AAC too. However, it is not yet supported by the iPod players or iTunes.
Finally, there's HE-AACv2, which adds Parametric Stereo to HE-AAC for high performance at even lower bit rates. However, there is even less widespread support for this standard.