I just noticed an improvement upon iTunes 4.2's AAC encoder in iTunes 4.5. I just looked at the file sizes of my AAC files encoded with iTunes 4.5 and a 20 minute song is just 6MB. This particular song has close to 10-15 minutes of silence in it. In iTunes 4.2 the song was around 20MB because iTunes encoded the entire song using 128kbps. This has to mean that iTunes lowers the bitrate for silence. I don't think that the encoder is true VBR since I believe the rest of the song is encoded at 128kbps CBR. But at least this is an improvement.

Edit: Interesting, I just opened the song in Foobar2000 and told Foobar to show me the bit rate changes in a VBR file and the AAC file flucuates between 125-132kbps throughout the song and then drops to 2kbps when the silence kicks in. Does iTunes now use ABR instead of CBR?

I've noted this too... perhaps it's "Smart ABR"