A couple of my friends have asked about HDMI, and so I thought that it would be worthwhile to explain it briefly. HDMI is a relatively new technology that you can use to connect your various A/V components together. HDMI is an all digital technology and includes both audio and video. Thus you can run this one cable and it will take care of audio and video which simplifies cabling.
The other thing about HDMI is that it is all digital thus unlike component video, the signal will not degrade depending on the kind of cables you use. It is a binary thing; it either will work or it won’t.
The problem with all digital from an IP perspective is that it allows for exact duplication of data and so HDMI also includes encryption which is designed to prevent you from making an exact copy of the data.
An older technology that you may have heard of is called DVI. DVI is similar to HDMI in that it is an all digital technology, but DVI only handles video and does nothing for audio. DVI may also include encryption and this is called HDCP. Thus if you connect your DVD player via DVI, you will also need to connect separate audio cables to the desired audio source. (e.g. TV or receiver)
As an FYI, DVI and HDMI are compatible and you can get an adapter that converts DVI to HDMI. Of course, DVI never contains audio and so the aforementioned converted will only convert DVI video to HDMI connectivity, and will not send audio over HDMI. Also, while the previous compability is theoretically true, I have run into problems in my systems. It is the usual finger pointing with one vendor claiming that it is an HDMI problem and the other claiming that is a DVI problem.
DVI/HDMI are all digital connections and are better than analogue connections (Component, S-Video, Composite)
HDMI provides the convenience of single cable connectivity and excellent picture quality.
DVI provides excellent picture quality and requires separate cables for audio.
HDMI is the latest technology and I recommend that you purchase and connect components with HDMI if possible. DVI is typically found on older components and is equally good though a bit more complex. If connecting via analogue cables then preferences are (best to worst) component, S-Video, Composite.