This article is from the CD-Recordable FAQ, by Andy McFadden (firstname.lastname@example.org) with numerous contributions by others.
Many CD-R creation packages will give you a choice between creating a
complete image of the CD on disk and doing what's called "on-the-fly"
writing. Each method has its advantages.
Disc image files are sometimes called virtual CDs or VCDs (not to be
confused with VideoCD). These are complete copies of the data as it will
appear on the CD, and so require that you have enough hard drive space to
hold the complete CD. This could be as much as 650MB for CD-ROM or 747MB
for an audio disc when using 74-minute blanks. If you have both audio and
data tracks on your CD, there would be an ISO-9660 filesystem image for the
data track and one or more 16-bit 44.1KHz stereo sound images for the audio
(On the Mac, you might instead use an HFS filesystem for the data track.
You can create the image with Mac CD recording software, or create it as a
DiskCopy image file and then burn the data fork under a different OS.)
On-the-fly recording often uses a "virtual image", in which the complete
set of files is examined and laid out, but only the file characteristics
are stored, not the data. The contents of the files are read while the CD
is being written. This method requires less available hard drive space and
may save time, but increases the risk of buffer underruns (see (4-1)).
With most software this also gives greater flexibility, since it's easier
to add, remove, and shuffle files in a virtual image than a physical one.
A CD created from an image file would be identical to one created with
on-the-fly recording, assuming that both would put the same files in the
same places. The choice of which to use depends on user preference and