To make things even more confusing, most external drives are just internal drives with an adapter bridge, a case, and a small power supply on them. If you were to crack open the case (may void warranties!), you'd find the same type of drive as an internal drive.
The drives themselves are capable of the higher speeds of the internal drives, but the connection used by the adapter bridge (USB in Ghost878's example) limits the speed.
Casey
*EDIT* Thread updated while I was typing.
The choice depends on what you are planning to use the drive for. If you will be moving the data on it around from location to location (like a high-capacity thumbdrive), get the external. An internal drive would be better for a permanent upgrade to a desktop.