A: ... Standard tank-style water heaters are usually sized in thirty, forty, fifty and even seventy-five gallon tanks for standard residential use. A modest power source such as gas, oil or electric will slowly heat the water and store the hot water in the tank ...
A tankless water heater does not store a large volume of water. Instead it relies on powerful gas or oil burners or electric coils to heat the water instantly ..."
Link: Ed Del Grande: Ask Ed -- Tank, Tankless... What's the Difference? (HGTVPro.com)
[I've read that tankless water heaters don't work as well in a home that uses lots of hot water.]