How can we be six versions into OS X and people still don't understand this?
Archive and Install takes your previous System folder, wraps it up into a disk image and saves it, and then installs a "clean" install of Leopard without deleting any other files (your apps, documents, settings and everything else stay right where they are).
EDIT: Okay, there are a lot of new Mac users, but as I recall the screen where you select your installation method clearly explains what each method does.