Buy it from Ita Rienus at Bravil's Mages Guild? Or create it? If the latter, how do I do that?

Thanks in advance.

It doesn′t matter if you want invisibility or chameleon, you just buy it at a guild that sells it. Then if you want you can create your own version at the University, provided you have access to it of course. You gain access by getting recommendations from every guild hall

First you have to purchase an Invisibility or Chameleon spell from a shop/mages guild, it doesn't matter how strong it is. Then once you gain access to the Arcane University, like Mirocu said, you use the alter to create a spell to your own specifications as long as your level in Illusion and your magicka pool can handle it.

Then there's the alternative, permanent invisibility through enchantment. First you need a illusion skill of 100 and 5 grand soul gems filled with grand souls. Then just enchant 5 pieces of clothing, jewelry, armor, etc. with chameleon. As long as you wear all 5 pieces you will be invisible and don't have to worry about recasting the spell or running out of magicka.

However the enchanting option is very game-breaking. I did it when I first started out and then just used it throughout the entire game, being able to run around and kill all your enemies without them fighting back gets really boring, so I don't suggest you do the second option unless you have the self control to use it sparingly.

Cheapest and likely earliest way is getting it from Jone Stone: http://www.uesp.net/wiki/Oblivion:Magical_Stones%23Jone_Stone. You need a combined fame/infamy of 10.

Thanks. Didn't know about the permanent invisibility -- that's fascinating. A lot of work to get it, though, eh?

Yeah, it took about 8 hours of casting the Rally spell on a horse to get my Illusion skill from 15 to 100. And then a few hours of searching for soul gems. It can come in handy for certain quests were stealth is needed but then again it also makes it way too easy and breaks the immersion. I stopped doing it a long time ago after I got into role-playing. Now I'm pretty much a purist if that's what you can call it, I only level my skills through using them properly, I don't power level anymore (used to do it all the time I have a few level 42-45 characters that I leveled in 2 days.). It makes the game more fun and it lasts longer too.