With the recent availability of Hotmail to the iPhone ... and the questions concerning lack of email features, it seems a good time to address the two primary email differences.
POP (POP3): Simple one-way communication. NEW mail is downloaded to the iPhone. No folder access, no synchronization, usually mail is deleted from the server after download.
IMAP: Advanced two-way communication. Mail is stored on the mail server and sync'd to the iPhone. Advanced folder management.
POP examples: Hotmail -> iPhone
IMAP examples: GMail, Outlook, (some) webmail <-> iPhone
As you can see, IMAP is much better than POP. GMail (also Yahoo) and many others use IMAP. Hotmail is really really late to mobile email support, and with only basic POP capabilities. (Why? think $$$$

)
POP & IMAP Accounts
E-mail Explained: The Difference Between IMAP and POP
Official Gmail Blog: Getting Gmail anywhere: IMAP versus POP
FYI: Exchange is an email
server commonly set up by large corporations. Both POP and IMAP can access exchange email, depending upon requirements & setup.