Ace he is talking about a hardware based modem versus a software based modem.
A hardware based modem is always significantly better than a software based modem. Software based modems eat up CPU time at a high rate and are subject to all the problems related to Windows.
External modems are all hardware based. If you go external, try to get a COM based modem rather than a USB based modem. The UART chip has a lot less overhead than the USB chips does.
