AAC

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Advanced Audio Coding (AAC) is an audio codec devised to replace MP3, and is the standard format in MPEG-4. It supports multiple channels, though it is usually used as stereo or surround, and it compresses considerably better than MP3.

There is some dispute on whether it is more effective than Vorbis for stereo, but it is definitely superior for surround.

AAC's native container is MP4, though it will work easily in Matroska and can be inserted into AVI via some hacks.

It is currently the standard audio codec used by many groups.

Profiles

AAC audio can be encoded in several different profiles, each providing better or worse compression for specific cases. The two most common formats are LC (Low Complexity) and HE (High Efficiency).

Low Complexity

Low Complexity, or LC-AAC, has little quality loss and can be encoded/decoded fast. It is usually the profile of choice for stereo encodes.

High Efficiency

High Efficiency, or HE-AAC, provides better quality at lower bitrates, and thus is ideal for multi-channel cases, such as surround audio. The most common HE-AAC encoder is Nero's.

High Efficiency v2

Another improvment that lets you encode stereo files as a single channel + parametric difference data which you can demodulate the second channel from. Pretty nifty, but only useful below 48kbits or so.