admin answers:

Briefly, and for all practical purposes:

Mail from POP accounts is stored and managed on your computer. Folder assignments, message flags, reply status, and other information is all stored locally.

Mail from IMAP accounts is stored and managed on the server. When you modify a message (mark it read, move it to a new folder, etc), your mail client sends changes to the IMAP server, which updates its copy.

The advantage of IMAP is that you can access your mail from any client, and it will always appear the same. Read a message on your cell phone, and when you check your mail on your desktop PC, it will be marked read.