Both standard iTunes playlists and smart playlists can be used to create a CD: in fact, creating a playlist is the easiest way to burn a CD from iTunes, since you will have all the information you need to make sure the songs you want to burn will fit on a CD. The procedure for burning these two types of playlists on a blank CD is the same. Using smart playlists, you could, for example, regularly burn the last 15 songs you purchased from the iTunes store (more or less than 15, depending on song lengths).
Blank CD size and duration: burn data CD or burn audio CD
Typical blank CD's offer two types of information: capacity (in megabytes) and duration (in minutes). Capacity information is useful when burning a data CD, often used for backup purposes. Duration is useful when creating an audio CD; iTunes only burn audio CD's. Therefore, duration will be the limiting factor when burning CD's in iTunes, not capacity.
The total duration of all the songs in your playlist will determine if they fit on your blank CD, not the actual size these songs occupy on your hard drive. This can sometimes be confusing since a 700Mb CD will often only accommodate much less size in music. Duration of all songs is the reason: a typical 700Mb (megabytes) CD allows for about 80 minutes playback. Most audiobooks you purchase from the iTunes Store will not fit onto a CD: the exceptions are audiobooks split into multiple, smaller tracks (as a rule of thumb, if a single audiobook track lasts more than 75-80 minutes, you will not be able to burn it on a CD - but iTunes will warn you beforehand, and not start burning the CD at all in case of capacity/duration issues).
Burning CD's is not as sensitive as it once was; still, your chances of ending up with a bad CD increase if your computer is busy with many other things in the background. Avoid playing a game while iTunes burns your CD.
Burning your songs on CD
First, insert a blank (writable) CD or DVD in your CD tray. If iTunes is running, it should automatically detect the newly added blank media, and display a corresponding confirmation message.
If iTunes does not detect the blank CD: 1) make sure the CD/DVD is indeed blank; 2) insert the blank CD again; 3) if no detection occurs, restart iTunes. If iTunes still doesn't see the blank CD, try another blank CD/DVD. This of course assumes that you do have the necessary hardware to burn CD's: does your CD tray say something like "CD-RW" or "RW" (Read-Write)?
Once you have received confirmation from iTunes that it detected the blank CD, Right-click (Windows) or control-click (Mac) on the playlist or smart playlist, and choose Burn Playlist to Disc.
iTunes comes with its own CD burning capability, which means that you'll be able to burn CD's from iTunes even if you have no specialized piece of software like Roxio Toast.
You can also tell iTunes to burn a CD by clicking the Burn Disc icon in the lower-right corner of iTunes' main window: it yields the same results as the playlist's context menu. In fact, you can also choose Burn Playlist to Disc from iTunes' File menu. Take your pick!
Exclude playlist songs (tracks) from being burnt on the CD
Whether you change your mind, or iTunes warns you that you are trying to burn more songs than the CD can handle, you can always adjust the number of tracks simply by unchecking their checkbox, as shown on the screenshot. Although iTunes will keep the track visible in the playlist, only songs whose checkbox is checked will be burned on your blank CD. Since removing songs from a playlist doesn't delete the song files themselves (only removes the reference to the song from the playlist), you can do that too, instead of unchecking songs you don't want on your CD.
Once iTunes has successfully burned your playlist to disc, it will automatically eject the CD; if it doesn't, you will see the CD, and the name you gave it (which is the name of the playlist), in the left pane. If this is the case, simply click on the Eject button.