The iTunes store has a big audiobook section. It's always best to buy from there, if possible.
However, I think the audiobooks on there still have DRM. (Usually, the ones without this (basically all of the regular music), has a plus icon next to the price.)
DRM is a very bad system, because it forces you to use iPods forever, as the audiobooks will not work on other systems.
I believe Amazon also sells many audiobooks. If they don't have DRM on them (I'm not sure), then go with them. It's a simple matter to drag the files into iTunes after purchase, and then sync to iPod as usual.
If both have DRM, and you accept those limitations, then go the iTunes store route, as it's simpler.