Back in the original pentium days, Intel realized that the computer's memory system was a serious performance bottleneck. Even a large cache of relatively fast memory on the motherboard did not help much. They then came out with the pentium pro, which has a L2 cache in the same package (but not on the cpu die) that ran at the same clock rate as the cpu die itself. This was expensive because of the L2 cache at the cpu speed but had much better performance.
Intel then decided that L2 cache at half of the cpu speed near the cpu core would be the next way to go. Thus slot 1 for the PII and PIII. This required the cpu core, L2 cache chips, a little circuit board to put it all on and some support components like filter caps, etc.
Later, when Intel's process technology advanced so that a substantial L2 cach could be integrated on to the cpu core (starting with the Celeron 300A that we all love), the need for external cache ICs went away. Intel still put these processors out in a slot 1 form factor. With slot 1, you could have a heat sink and fan on both sides of the processor package. My 300a would run at 527MHz this way at 2.2vcore.
For cost reasons mostly, the socket 370 package is what Intel is going to now.
As far as which is better, I would have to say that, for the cpu speeds available now, it does not matter in a practical sense. Ultimately, I would GUESS that the socket 370 packaging might have the edge inasmuch as that there is less trace length from the cpu core to what it is connecting to.
Paul