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VBR stands for Variable Bitrate -- as opposed to CBR or Constant Bitrate. Variable Bitrate is a term that relates to the bitrate used in the overall sound quality of a media file during audio and video encoding. VBR allows for a higher bitrate to be used during more complex portions of the encoded media and less bitrate to be used where the media file may not be as complex. Of course, the higher the bitrate, the larger the storage needed for the encoded file. In the end, the bitrates of the entire project are calculated and averaged as a representation of the overall sound quality of the encoded media. MP3, WMA, Vorbis, and AAC audio files can accept the VBR standard and it is commonly used in MPEG-2 designated videos.
There are advantages and disadvantages to VBR. One advantage is that VBR encoded media will produce a better overall sound quality to the media, however the disadvantage is that the media will take significantly longer to encode. VBR uses less or more bits depending on the complexity of the audio to more accurately represent the true sound of the media file.
There was a time when many hardware devices were not able to correctly play VBR encoded files accurately, but in recent hardware developments, a good number of media devices such as the Apple iPod have included accurate VBR playback.