Depends on your needs.
AAC: Defined in the MPEG-4 specs. Supported by iTunes and the iPod. Beyond the iPod there isn't much portable support yet. iTunes and FAAC are the only free implementations. Offers transparency in the 192-224kbps range but 128kbps is great for portable use. iTunes AAC is not gapless. I believe Nero and FAAC AAC are gapless.
Ogg Vorbis: An open, free audio codec. Has a lot of support in PC media players (not sure about Mac). The Rio Karma and some iRiver models support Ogg Vorbis but that's it currently. Has its own standard tagging. Reaches transparency in the 200kbps+ range (q 6). Gapless.
MusePack: Considered the best lossy encoder. Reaches transparency at lower bitrates than MP3 and Ogg Vorbis. An MPC file encoded at the standard profile (q 5) is usually in the 160-190kbps range and to most people it should be transparent. No hardware support for MusePack currently. Hardly any players except for Foobar2000 support it natively but plug-ins are available for Winamp and other media players. Gapless.
What is the best codec for your needs? Only you can decide that. Good luck choosing a format