There are three types of geodatabases: File, Personal, and ArcSDE. Selecting the appropriate geodatabase to work with will depend on the specific requirements of your GIS project and/or application.
File Geodatabases
In file geodatabases, each dataset is stored as a separate file on disk, and each geodatabase is held in a file folder. File geodatabases provide fast performance and can scale to very large file sizes (e.g. each dataset can be up to one terabyte in size).
File geodatabases support all geodatabase capabilities such as topologies, raster catalogs, network datasets, terrains, address locators, and so on. However, file geodatabases do not support mutli-user editing and other version-based workflows like ArcSDE geodatabases.
File geodatabases have far better performance and a much greater storage capacity than personal geodatabases.
Personal Geodatabases
Personal geodatabases are stored and managed using Microsoft® Access™. They are designed for a single user working with smaller datasets and are limited in size to 2GB for the entire geodatabase. Personal geodatabases are only supported on Microsoft Windows.
Many users like the tabular data management capabilities provided by Microsoft Access. Personal geodatabases work well for small datasets. They support all geodatabase information types such as topologies, raster catalogs, network datasets, and address locators. Personal geodatabases are single user and therefore do not support versioning and long transactions.
ArcSDE Geodatabases
ArcSDE geodatabases manage spatial data within an RDBMS such as DB2, Informix, Oracle, SQL Server, PostgreSQL, and SQL Server Express. Through this architecture, ArcSDE offers a multiuser editing environment and can manage extremely large datasets. ArcSDE geodatabases also support version-based workflows such as geodatabase replication and archiving that are not supported with file and personal geodatabases.
Organizations requiring the full suite of geodatabase functionality and a geodatabase with the capacity for extremely large, continuous GIS datasets that can be edited and accessed by many users should use an ArcSDE geodatabase.
For a more detailed comparison, see Types of Geodatabases in the ArcGIS help system.