An MP3 CD is a compact disc that contains digital audio in the MP3 file format. Discs are burned in the Yellow Book standard data format (used for CD-ROMs), as opposed to the Red Book standard audio format (used for audio CDs). MP3 files are supported by many newer CD players and DVD players.
When you select the MP3 CD burn option, your songs are burned as MP3s. I have several CD players, but the only one I have that will play MP3 CDs is the one in my new car.
When you select the Audio CD format, iTunes converts the songs so they can be played in any CD player.
You can have about 20 songs on an audio CD but more than 120 songs on an MP3 format CD. However, MP3 format CDs can only play in an MP3 capable CD player or a computer, while an Audio CD can be played in virtually any CD player.