X-Fonter 14.0

Font Types

Raster fonts are stored as arrays of bitmaps where each character has its own bitmap.
They cannot be scaled, so each size has to have separate bitmap sets, but generally these bitmaps are there for the most frequent used point sizes (8, 10, 12, 14, 18, 24). Windows can scale raster fonts to even multiples of their supplied sizes, but for larger fonts it is recommended to use scalable fonts instead.
Bold, italic, underline, and strikethrough styles can also be generated from a standard raster font.

Common raster fonts are Courier, MS Serif and MS Sans Serif, System and Terminal.

Raster fonts are stored in .FON files, which are relatively small.

Vector Fonts

Vector fonts (also known as stroke fonts) create their characters by drawing a set of lines drawn between points.
They can be scaled to any size. Vector fonts are stored in Windows as collections of graphics device interface (GDI) calls and are time-consuming to generate but are useful for plotters and other devices where bitmapped characters can't be used.

Some Windows applications automatically use vector fonts at larger sizes. These applications often allow you to specify at what point size you want to use vector fonts. For example, the "Vector Above" setting in Aldus PageMaker specifies the point size at which PageMaker will switch to vector fonts.

Common vector fonts are Modern, Roman and Script.

Vector fonts are stored in .FON files, which are relatively small.

Outline Fonts (TrueType, Postscript, OpenType)

Outline Fonts are fonts where characters are defined by a number of points and an algorithm to link these points, so that the outlines of the characters are created. The biggest advantage of these fonts is that they are scalable to any size. When the outlines are created for a specific size, the result needs to be mapped back to a bitmap format. This process is called rasterization. To improve the quality of this rasterization certain hints can be embedded in the font.
The term outline fonts is less known, but this category mainly consists out of the two most widespread font types around : TrueType (Apple/Microsoft 1991) and Postscript Type 1 (Adobe 1985).

What exactly is the resemblance/difference between these two font types and which one is the best ?

Both these font types define points and an algorithm to link these points. PostScript uses cubic bezier curves while TrueType uses only quadratic B-splines/bezier curves. The precision of these font types is comparable and usually better than one would ever need. The quality of individual fonts does not depend on the font type, but more on the effort of the author of the fonts.

TrueType fonts are stored in a .TTF file. Postscript fonts can consist out of different file types.

Type 1 fonts are implemented by two important files: the outline descriptions (in .pfa or .pfb formats), and the metrics, kerning, and ligature information (in .afm (or .pfm) files).

In 1996 Adobe and Microsoft initiative surprised industry analysts. As part of the deal, Microsoft and Adobe licensed the TrueType and PostScript font technologies to each other and a new font type was born : OpenType.

OpenType puts either a PostScript or TrueType outline in a TrueType-style wrapper. Applications and most operating system functions outside of the font subsystem will no longer care which type of font is in this "wrapper."