In general, MP3 takes the original uncompressed audio source (such as a CD) and removes information to make the size of the file smaller. The process with which it does this is somewhat complex to describe, but it basically degrades the audio quality slightly from the original audio source. The higher the bitrate, the closer to the original the MP3 file is.

Thus, 320kbps sounds closer to the original (better) than a 128kbps file. Generally, with anything 192kbps and above, it's hard for most people to distinguish the difference between the original audio and the MP3. (although some people can)

VBR means variable bitrate. Normally, MP3 files are encoded at a constant bitrate (CBR), a certain number of bits per second. Variable bitrate allows the MP3 encoder to vary the bitrate depending on how complex the audio waveform is, which can allow certain MP3 files to get encoded more efficiently.