As per Apple's own tech notes describing the various modes in its AAC encoder, VBR is best for quality:
http://developer.apple.com/technotes/tn2008/tn2237.html
{quote}Constant Bit Rate (CBR) - Recommended for live streaming.
This mode achieves a constant target bit rate and is completely compliant to the CBR mode specified in the MPEG-4 standard. This mode is suitable for constant-bit-rate network transmission when decoding in real-time with a fixed end-to-end audio delay. However, due to the strict constant bit rate constraint, this mode offers the lowest audio quality and highest complexity among all the encoding modes offered.
Average Bit Rate (ABR) - Default Mode, recommended for controlling file size.
A target bit rate is achieved over a long term average (typically after the first few seconds of encoding). Unlike the CBR mode, this mode does not provide constant delay when using constant bit rate transmission, but provides best overall quality while still being able to strictly control the resulting file size with less complexity than the CBR mode.
Variable Bit Rate (VBR) - Recommended for controlling audio quality.
The audio signal is encoded with constant (and settable) quality and virtually no bit rate constraints. This is the best mode to achieve consistent audio quality across many files and the smallest file size to achieve that quality. It also has the lowest complexity of all the encoding modes.
Variable Bit Rate But Constrained (VBR Constrained) - Recommended as a compromise between VBR and ABR.
This mode is similar to VBR but limits the average bit rate variation. The lower limit is the user-selected bit rate. Higher bit rate is adapted for difficult tracks and can generate larger files than the ABR mode.{quote}
iTunes uses the CBR and VBR Constrained modes.