Currency exchange or ATM?

Definitely ATM. Check with your bank on what the rates/fees are for international use of ATM.
Credit Unions normally have better deals... charging 1% per ATM withdrawal.

I haven't used currency exchange, so I can't compare. I use ATMs, which are ubiquitous and just as easy to use there as here. Check to see what your daily withdrawal limit is.

Just like home, we actually didn't use much cash. Just about everywhere takes credit cards and we used them for everything except petty cash type purchases or to buy lunch at a small mom and pop café.

ATM no doubt the best.

As Doug mentions it is wise to use the least amount of cash as possible and use credit for every you can purchase in that manner. In Italy you will still find some cash only areas but only in small pockets.
The Cinque Terre for example is a popular spot that has many establishments which have stayed cash only for things people would now days rarely pay cash for.

Currency exchanges have high fees, sometimes about 20%. Fees can be buried, and not up-front. Look at the "buy" vs "sell" rates - a big discrepancy is where you get charged.

"do the ATM's give a better exchange rate?" - The ATM (or the company that runs it) doesn't do the exchange. They charge your card company (Mastercard, Access etc.) the amount you take out (Euros) and the card company does the exchange at their rate for the day and passes it on to your bank in whatever your home currency is. You bank may then add a "Foreign transaction fee".
Sometimes you are asked by the machine if you want to be charged in your home currency. ALWAYS SAY NO. Insist on being charged the actual amount you are getting out of the machine. If the ATM does the exchange it will inevitably be at a worse rate than the card company, and your bank will still charge the "Foreign transaction fee".

And make sure you have notified your bank you are using your cards in Italy, so they don't block it as a suspicious transaction.

For the ten thousandth time --- The cheapest and most convenient way to obtain local currency is always a debit card at a local owned bank ATM in Europe. Regardless of the fees charged by your bank it will always be cheaper than a money exchange, travel checks, etc.

ATMs don't have an exchange rate. You ask for Euros, you get Euros. Your card network sets the exchange rate and it is the best possible anyone could get. It is what you see when you type in the currency on Google. So yes, much better rate than any other option. Your bank is charged in your home currency by the network.

Most ATMs in Europe do NOT charge a transaction fee if they are owned and operated by a bank. Avoid the ones in bars restaurants and other stores which are not bank owned and can charge fees. Some travelers have mentioned that the ATMs in Spain do charge fees now.

If it makes you feel better, go to your local bank to see if they stock Euro. If so, (and most likely there will be a small fee plus their exchange rate), get 100 euro or so until you get to Rome and can navigate the Bancomat = ATM

That's what we do. This way we can get off the plane and not worry about trying to find an ATM first thing. When we do withdraw from an ATM, one of us stands point guard facing away and watching for any unwanted attention. We then find a place to secure the cash in a money belt. I don't withdraw any more than I'm willing to lose, which is usually ~100 euro.

Large withdrawals have a potential disadvantage: Some ATMs will dispense very large bills, and you do not want to try to make a small purchase in Italy with a 50-euro or 100-euro note.

If you have more than one credit card, I encourage you to call the toll-free number on the back of each card and ask about the foreign-transaction fee. You may find that your cards are different, and you can choose to use the best one as your primary card during your trip. Take an extra card or two if you have more than one, just as back-up. But don't carry it in your wallet. It should live in your money belt or back in your hotel room in a locked suitcase.

I'm always amazed at how many replies and how quickly they happen on this site! Thanks to all for the advice! I have checked with both my debit card and credit card companies and, while neither has foreign transaction fees, the credit card company charges a $10 per transaction cash fee (even in the US) but nothing for purchases. The debit card doesn't charge for either. Also checked the daily limit and no problem there...$1,000! SO my plan is to exchange a small amount at the airport (just in case...I'm a pessimist sometimes) and the rest at ATMs in Italy. Thanks again to everyone!

Instead of exchanging money at the airport, that would be a good place to test your Debit card to see if it will work (since you state there is no fee, it won't hurt anything to try). Then if it doesn't, exchange a couple hundred to tide you over until you can talk it through with your bank.

Your credit card company charges $10 per cash transaction? And would that also be in addition to the interest rate of up to 20% or so that starts accruing immediately? You should never used credit card to obtain cash unless absolutely desperate. Get your cash using your debit/ATM card from your bank account, that is already your money.

In Italy, ATM = Bancomat. I think every time we have used one, it has been possible to select English.

Maybe you want to get some euro at a Travelex booth, perhaps a hundred euro, so that you have some local cash when you arrive. Nice, but far from essential.

When we went to Italy year before last one person in our party insisted on bringing cash to exchange because that is what he did in the 80's. We went to several exchange places before he was convinced that he was going to take his cash home with him and just get money from an ATM. Don't know where you live but there is a good exchange place in Brentwood, CA that I always go to get my airport stash -- I hate landing and not having anything in my pocket.