SD vs. CF What's the difference - and what's SDHC?
Secure Digital (SD) cards are quite a bit smaller and lighter than CF cards. They have a 9 pin interface rather than a 50 pin interface and this limits them to a 4-bit data transfer bus rather than the 16-bit data transfer bus of CF cards. In principle this makes their maximum possible transfer speed slower, but in practice there is little difference when used with current digital cameras. In the past SD cards were more expensive than CF cards and were not available in as high a capacity versions, but this is really no longer true. The very small size of SD cards means that they are not available in a microdrive version, they are all solid state memory.
The fastest SD(HC) cards are currently 133x (20MB/s). Though this is still not as fast as the speed of the very fastest CF cards (45 MB.s, 300x), it's still pretty fast.
The SD format itself is limited to 2GB. In principle they could be made up to 4GB but that would require the use of FAT32 formatting which isn't part of the standard SD specification (SD uses FAT12 or FAT16 formatting). However a new SDHC (SD High Capacity) standard has been introduced which uses the same physical form factor but which uses a different memory addressing method (sector addressing vs byte addressing) and enables cards to be produced with capacities from from 4GB to 32GB. Cameras must be SDHC compatible to use SDHC cards, though most SDHC compatible cameras should be able to use regular lower capacity SD cards. However SDHC is not backwards compatible with SD and that means a 4GB SDHC card will not work in a camera designed only for use with SD cards.
Most new digital cameras will be SDHC compatible, but not all current cameras are. For example the Canon Powershot G7, A710 IS, A630 and A640 are SDHC compatible, and Canon have just released firmware updates for the 1Ds Mk II, 1D MkII N and 1D Mk II to make them SDHC compatible. Sandisk have a compatibility checker on their website
CF cards also have an onboard microcontroller for the memory which takes some load off the host, but this is currently more of theoretical interest than practical significance. The "Secure" in Secure Digital comes from the card's origin which was concerned with digital rights managements schemes to prevent copying of music! SD cards contain encryption hardware, but it's not used in 99% of all applications and it looks just like flash memory to a digital camera. MultiMediaCards (MMC) are essentially the same as SD cards, but without the encryption hardware and with a few other technical differences.