LCD flat panels are natively digital devices, the VGA signal on the standard VGA connector is analog. So with normal VGA hooked up to a LCD the signal gets converted to analog from digital on the video card, sent over the cable and then converted back to digital from analog on the LCD side. This double conversion does cause some picture quality issues.
DVI on the otherhand is a completely digital signal, no conversions are done to it and thus it provides much better picture quality on LCDs than standard VGA does. If you plan on getting a LCD monitor make sure you use DVI with it.