[Desire Q&A, Help & Troubleshooting] neoKushan:
Ok, so here's the deal, in a very longwinded way that should hopefully explain everything and answer ALL questions.

You have an SD card in your phone and, a bit like normal PC Hard Drives, you can "partition" them (split them into two or more sections of different filesystems). Normally, your SD card is just one big FAT32 partition, which is fine for storing your pics, messages, emails, etc.

Now, other then your Phone's SD card, your phone will have its own internal flash memory (or "NAND") storage. Tradditionally with Android, you could only install applications to this NAND storage, you cannot install them onto your SD card. So if you have an empty 32GB SD card, but only 5Mb of internal phone storage, you still wont be able to install many apps, if any at all.

This was done to protect the apps from things like piracy - it's not easy to access the location where apps are installed on your phone's internal storage (normally impossible without root), so you can't for example buy an app, copy it, refund it, then install it again.

Still, this is no good for those of us who like to install lots and lots of apps, legitimately, as we run out of internal storage very quickly.

So Google came up with a way to install apps to the SD card. A folder is created called something like .android_secure and this stores (I believe) encrypted versions of applications, but there's a few catches:

1) Apps aren't automatically stored here, you have to manually "move" them

2) Not all apps are capable of being moved, in fact most apps aren't, the developer needs to update their app and allow it. Some apps aren't and wont be updated and some developers may not want to allow it for whatever reason.

3) Not all app data is moved, most of it is but some data is left on your phone so many people still run out of internal storage quickly.

4) You can force ALL apps to be moved to this area by default, but it breaks incompatible ones - such as Widgets, which are unable to load due to the SD card not being "prepared".

So that's Froyo's version. Before Froyo existed, some very clever people came up with a thing called "Apps2SD". Remember I said that your SD card normally is one big FAT32 partition? Well, Apps2SD works by having your SD card patitioned into TWO filesystems. A normal FAT32 partition for your usual stuff and a secondary "EXT" partition. EXT is just a filesystem, like FAT32 or NTFS, but it's the filesystem used by Android internally. The SD card is normally FAT32 because it's a "universal" filesystem, that just about any machine will be able to read, whereas EXT filesystems are generally Linux only, but I digress.

EXT has several different versions. The most common one you'll see is ext3. The main difference between ext2 and ext3 is "journaling", which is just a fancy way of saying that should an operation (such as copying, writing or reading) be interrupted unexpectedly (say, by you turning your phone off), then no data should be lost or corrupted. You know how when you turn your phone on, it says "preparing SD card"? It takes a few minutes, but what it's actually doing is checking that the FAT32 partition hasn't been damaged, because FAT does NOT have journaling. If you used a computer back in the Windows 98 days, you may remember that lovely blue "Scandisk" screen that had to run every time you didn't shut your computer down correctly - that's the same thing. But then Windows 2000/XP came along with NTFS, which also has journaling, meaning you had less chance of loosing data. But I digress once more.

So you have your SD card partitioned into EXT and FAT32. Generally it doesn't matter if it's ext3 or ext4, but you don't get any real advantage with ext4 over ext3 in this instance. Apps2SD then runs a special script on your phone which "symbolically links" the folder from your phone's internal storage where your apps are normally stored, to the ext partition on your SD card. A symbolic link is a bit like a shortcut for folders, except it's transparent to the OS: In other words, Android doesn't know that when it's installing it's apps to the internal phone storage, it's actually being stored on the SD card. This effectively boosts your internal phone memory from the previous 5mb that you had in my example above, up to whatever size you made the ext partition on your SD card (often 512Mb or 1Gb, but it depends on how many apps you install).

Plus, because it's "journaled", it doesn't need to be "prepared", meaning it's ready to go as soon as the phone starts - so your widgets and apps work immediately (unlike "forced" Froyo Apps2SD, where widgets disappear).

The catch with Apps2SD is that whatever space the ext partition takes up is taken away from the SD card. So if you have a 4Gb card (with something like 3.5Gb of actual storage) and you make a 512Mb ext partition, your SD card will "shrink" to 3Gb. The space isn't actually lost, it's just being used by the ext partition. If you reformat your card, you'll get it back.

Finally, there's a difference between "Apps2SD" and "Apps2SD+". Remember I said that your apps are stored on a special folder inside your Phone's NAND storage? Well, that was a bit of a lie. It's actually stored in TWO places. There's a second area which is called the Davlik Cache. You don't really need to worry about what this is for (Hint: IT's to do with the Java runetime your phone uses to run apps), all you need to know is that apps use it to store data, which also eats up internal phone memory. Apps2SD+ moves davlik cache to the ext partition on your SD card as well, freeing up even more space. Some people believe that this may come at the cost of performance, as the internal NAND memory should be faster than your SD card (Which is why you also get people arguing over which "class" SD card is better for Apps2SD - the logic being that a faster SD card means less impact from this move), but the truth of the matter is that your applications will be running from your Phone's RAM anyway, so performance isn't really impacted at all. Since most apps are only a few hundred Kb's in size, or a couple of MB at the most, it's a non-issue.

Finally, any recent version of Apps2SD/Apps2SD+ should work with an SD card that is or isn't formatted with an ext partition. It'll check for this partition when your phone first boots and if it's not there, just use internal phone storage.

Having an ext partition WITHOUT Apps2SD+ shouldn't cause any issues, either, so you can format your SD card whenever you're ready.

So in summary:

Apps2SD "fakes" your phone's internal memory and puts it all on a hidden section of your SD card.

Apps2SD+ pushes even more content to the SD card, freeing up even more space on the phone itself.

"Froyo" Apps2SD has various limitations that "old" apps2SD does not, but is much easier to handle as it doesn't involve any kind of "partitioning".