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CABAC, which stands for Context-adaptive binary arithmetic coding, is a video encoding method used in MPEG-4 AVC to enhance quality at lower bitrates than the alternative, CAVLC.
CABAC's advantage at low bitrates require more advanced hardware than CAVLC. Older computers often can't play AVC files encoded with it. It also requires more encoding time. However, for high definition video, where bitrate is at a premium, it's often worth the extra time to encode using CABAC. If the video you're encoding was originally encoded to a format like MPEG-2 that uses more primitive encoding methods the extra encoding time often isn't worth it.
Both Blu-ray and HD DVD support CABAC in AVC video.