AAC stands for two things: either MPEG-2 Advanced Audio Coding or MPEG-4 Advanced Audio Coding and as its full name suggests, it is either an MPEG-2 or MPEG-4-based audio format.

The MPEG-2 version of the format is also often called as MPEG-2 NBC as in Non-backwards compatible, but the correct name that should be used, is the AAC. The NBC name comes from the fact that unlike older MPEG audio encoding methods, it is not backwards compatible (for example, MP3 is backwards compatible to MP2) to older MPEG audio formats.

MPEG-2 AAC produces better audio quality than MP3 using less physical space for the files and MPEG-4 AAC produces better quality and smaller files than MPEG-2 AAC.