What's the difference between a POP3 account and a forwarding account?

At Bagpiper.Com you get two types of email accounts.

A POP3 email account receives and stores email on the email server here at Bagpiper.Com. You log into the account directly to retrieve mail. A forwarding account uses your domain name (you@yourdomain.com), but sends the mail to another email account that you specify. The other account can be anywhere; you@aol.com, you@earthlink.net, etc. The messages are not stored on our server, but rather "forwarded" to the other target email account.