Hi I have a question about the vce(robust) option. (the option is same with vce(cluster pid) in xtreg command)

Consider a fixed effects model below
y_{it} = a + X_{it}b + mu_i + e_{it}, where mu_i is the fixed effects.

When we use the within-group regression (<=> fixed effects regression),
you know we first transform the model and it is obvious that the transformed error terms, e_{it} - \bar{e}_i, are correlated across time.

My question is that when we should use the vce(robust) option?
1. e_{it}s are serially correlated?
2. e_{it} - \bar{e}_i are serially correalted? (i.e. every time when we run xtreg _____, fe)

In a sentence, I am not sure whether the vce(robust) option is applied to e_{it} or e_{it} - \bar{e}_i.

Thank you.