HMO (Health Maintenance Organization)
HMOs are strict but usually cheaper. You must stay inside their specific network of doctors and hospitals. Furthermore, you have to pick a Primary Care Physician (PCP). If you want to see a specialist (like a dermatologist), you must get a permission slip (a referral) from your PCP first. If you go out of network, you pay 100%.
PPO (Preferred Provider Organization)
PPOs offer freedom, but they cost more. You do not need referrals to see specialists. You can go to any doctor you want. If you see a doctor that is 'Out-of-Network', the insurance will still pay a portion of the bill (though less than if you stayed in-network).
Which to choose?
If you don't care which doctor you see and want to save money, take an HMO. If you have specific specialists you refuse to leave, or you travel often, pay extra for the PPO.