Check your plan for details. When you leave your employer you'll be required to close out the 401k account. You can take it as a lump sum distribution and pay taxes on it. Or you can roll it over into a regular IRA account and defer the taxes. Getting your money out of a regular IRA is a little harder.
All withdrawals are taxable.
In most cases, if he's eligible for a 401k with an employer matching contribution, that's the best option. Having that money accumulating tax free is too big a benefit to pass up. If you're older or fighting tax problems and want the deduction a traditional IRA would fit the bill. One final thought for Russ. Every dollar that he saves in his 20's is the equivalent of four dollars saved in his 50's.