event.preventDefault() vs. return false

return false from within a jQuery event handler is effectively the same as calling both e.preventDefault and e.stopPropagation on the passed jQuery.Event object.

e.preventDefault() will prevent the default event from occuring, e.stopPropagation() will prevent the event from bubbling up and return false will do both. Note that this behaviour differs from normal (non-jQuery) event handlers, in which, notably, return false does not stop the event from bubbling up.

Source: John Resig

Any benefit to using event.preventDefault() over "return false" to cancel out an href click?

From my experience, there is at least one clear advantage when using event.preventDefault() over using return false. Suppose you are capturing the click event on an anchor tag, otherwise which it would be a big problem if the user were to be navigated away from the current page. If your click handler uses return false to prevent browser navigation, it opens the possibility that the interpreter will not reach the return statement and the browser will proceed to execute the anchor tag's default behavior.

$('a').click(function (e) {
  // custom handling here

  // oops...runtime error...where oh where will the href take me?

  return false;
});

The benefit to using event.preventDefault() is that you can add this as the first line in the handler, thereby guaranteeing that the anchor's default behavior will not fire, regardless if the last line of the function is not reached (eg. runtime error).

$('a').click(function (e) {
  e.preventDefault();

  // custom handling here

  // oops...runtime error, but at least the user isn't navigated away.
});

This is not, as you've titled it, a "JavaScript" question; it is a question regarding the design of jQuery.

jQuery and the previously linked citation from John Resig (in karim79's message) seem to be the source misunderstanding of how event handlers in general work.

Fact: An event handler that returns false prevents the default action for that event. It does not stop the event propagation. Event handlers have always worked this way, since the old days of Netscape Navigator.

The documentation from MDN explains how return false in an event handler works

What happens in jQuery is not the same as what happens with event handlers. DOM event listeners and MSIE "attached" events are a different matter altogether.

For further reading, see attachEvent on MSDN and the W3C DOM 2 Events documentation.