They do different things in the same general way.  Putting AO on one or more lights, as I understand it, will apply AO to everything within the scene, with the parameters you set for that light.  Setting AO by material zone will only apply it to those materials you take that step for, and nothing else.  I actually do both, which may or may not be a good idea, but I'm generally happy with my results.

edit: ... like Anton says :)

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