When replacing your aging water heater, the biggest decision you need to make is what type of system to purchase. The most common type of water heater is a conventional storage water heater. These hold between 20 and 80 gallons and release hot water from the top of the tank. These provide you with a reservoir of hot water for household usage. If you are looking for a more energy-efficient unit, you can install a tankless water heater. These provide hot water on demand.