The two basic types are streaming and downloadable. Streaming music means that it is downloaded while you are listening to it. This, in my opinion, is a good idea but has not blossomed yet. Streaming music also cannot be listened to while your computer is not on the Internet. This is fine for people that have cable modems or other dedicated connections but people with modems might not want to have to dial up every time they want to listen to their music.
Downloadable music is the best form of music in terms of quality and usability.
The most popular form of downloadable music is the MP3. There are companies such as Shoutcast that are making MP3s streaming but this is still not as preferable as a downloaded MP3. MP3 stands for MPEG Audio Layer 3. MP3 is a lower quality audio encoding method than the standard used in DVD and HDTV but because the source of almost all MP3s are CDs and not Dolby Digital, this is not that much of a factor. This Digital Music section will be discussing MP3s.