Ah ha! Good question. There are three ways to pay for bulk mail postage: precanceled stamps, postage meter, and permit imprint. Here are the differences (and links for even more info):
Precanceled Stamps: You use these exactly like you would normal stamps (i.e. you manually stick one on every mail piece. What makes them different is that they are in a smaller denomination than regular stamps, to account for your discounts. If your actual postage comes out to be more than the precanceled stamp is worth, you simply pay the difference when you mail, without needing to affix additional stamps.
Postage Meter: A postage meter is a machine you can buy that enables you to print your postage right onto your mail piece without needing stamps. (Although you can also print the postage onto a label to be applied to the mail piece.) Depending on whether you need it to be able to fold, package, etc., in addition to calculating and affixing postage.
Permit Imprint: Permit imprints are the simplest form of postage payment for high-volume mailers. Basically, you set up an account with your post office and print the permit onto the mail piece where the stamp would go. Then, when you drop off your mailing at your business mail entry unit (BMEU) location, the postage is calculated and deducted from your account. Easy peasy.