If you specify HTML, the content is inserted as is, with no modification. If you specify Text, the content is HTML encoded first. HTML encoding encodes only a few characters:
less than (<) is encoded as <
greater than (>) is encoded as >
ampersand (&) is encoded as &
double quotes (") are encoded as "
This is important because those characters are used in HTML to specify HTML objects. For example, assume you wanted to insert the following:
Corey finished < Mahound but > everyone else.
If you specified this as HTML, the < Mahound but > part could be interpreted as an HTML element, and thus it would appear on the screen as:
Corey finished everyone else.
(because to IE, < Mahound but > is supposed to be an HTML element, but it isn't a known HTML element, so it's discarded).
If you specify it as Text, it would be encoded as:
Corey finished < Mahound but > everyone else.
... which would make it appear as:
Corey finished < Mahound but > everyone else.
Specifying it as Text allows you to freely write your content without having to worry about less-than, greater-than, ampersand, or quotes (although quotes aren't really a problem), but you don't have free control over the flow or layout of the content. Specifying it as HTML allows much more freedom, in that you can insert HTML elements like <font> or <div>, but it means you'll have to encode for yourself those special characters when they are meant to be interpreted as text and NOT HTML elements.