Basically, the idea is that lame can determine what sections of music require a lot of bandwidth to sound good and which require less. This means that if you want your music to come out at 192 or so, it can encode some hard sections at 320, but other easier ones at 64. This means that you potentially get the benefits of encoding at 320, but keep the file size lower. This is VBR.

Then ABR, as described, does sorta the same thing, but tries to make the average come out to be at a specified point, making the file size a known quantity, instead of having the encoder determine how good the sections need to be to fit some arbitrary (and much harder to quantify) notion of quality.

Most folks eschew ABR, as it does little more than CBR. If you're concerned about disk space, I'd go with CBR instead of ABR. VBR, though, is the more common setting. You don't know what size file you'll get out of the encoder. If the entire piece of music is really hard to encode, it might end up averaging to about 300kbps, whereas a simpler piece with the same encoder settings might average to 100kbps. (Note that those numbers are made up, and unlikely in reality, but the idea is valid.)

I'd suggest using lame with its -preset options. They will generate VBR files with hand tweaked settings to make them sound the best for most tracks, rather than you guessing or using plain-jane defaults. I personally use the -preset standard, and the ouput seems to average somewhere around 195kbps.

Note that there are a couple of drawbacks to VBR. One is that lame, which is the most common encoder, had a bug that prevented nogap from working properly, which means few people did work to make VBR files play back seamlessly properly. The 2.0 empeg software doesn't do it properly. (For that matter, I don't remember if it does CBR nogap properly.) The 3.0 was supposed to be better, but I haven't checked it yet. Also, FF and REW in VBR can be tricky, though I've never seen the empeg software screw it up unless the mp3 had incorrect data.

The 100% safe option is CBR. The just-as-good-quality, but saving space option and potentially slightly troublesome is VBR. I don't think I'd ever suggest ABR.