Here's the basic breakdown.
There are two types of decoders, hardware and software.
Hardware decoders are exactly what they sound like... a piece of hardware.
The usual case, it comes in a PCI card format and it usually has a TV out, audio out and digital out options.
Like many have mentioned here, you probably will not need a hardware decoder card if you are running a 400+ mhz computer since one of the main reasons for a decoder card is to have the card be used as an accelerator instead of the cpu. Faster CPU does not benefit from this as it has no trouble decoding it. Probably the only benefit is that it has less CPU load when you use the hardware card.
Another major reason and personally this is my reason for using a hardware decoder card is because it has superior TV output when playing DVDs. Quality is very good using the TV out (atleast in my Hollywood Plus) as it's made to output DVD movie and sound only.
If you were to use your hardware decoder to play on your PC monitor, there is little or no difference in picture quality in comparison to a software decoder.
Software decoder is basically a third party software that uses it's own decoding but uses the CPU power... not much to explain there.
If you plan to view DVD movies on your PC monitor only and you have a 400+mhz CPU, dont bother getting a hardware decoder card... no benefit for you there. I believe tne newer version of PowerDVD (a software decoder) has dolby 5.1 output (could be wrong...) if needed and like I said, there is no picture quality difference if you are watching it on your PC monitor.
K, I've ranted enough, need sleep now.
Hope that helps.