I just found this:
"AAC files are generally higher quality and slightly smaller than MP3 files of the same song. The reasons for this are fairly technical (more about the specifications of the AAC format can be found at Wikipedia), but the overview of the reasoning is that AAC was created after MP3 and it offers a more efficient compression scheme, with less quality loss, than MP3s."
Source:
http://ipod.about.com/od/introductiontoitunes/a/aacmp3choice.htm
Message was edited by: Woollers