SPW: Workspaces Defined
SharePoint Workspace offers users the ability to collaborate with or without a central server. When you create a new workspace from the launchbar, you have three options:
SharePoint workspaces use centralized server-based network architecture for data storage and retrieval. Users must be able to connect to the server in order to publish changes that others can see. All data exists on the server itself (SharePoint Workspace just makes a local copy).
Groove workspaces use peer-to-peer technologies for collaboration without any central server. Rather, each member of a Groove workspace is in essence a server for other workspace members. Therefore, users need to be online simultaneously for changes to propagate across Groove workspaces. When you are working with Groove spaces, you have the choice between creating a Groove 2010 space or a Groove 2007 space. The 2007 spaces are compatible with Groove 2007 and SharePoint Workspace 2010, and 2010 spaces are only compatible with SharePoint Workspace 2010.
Using Groove peer-to-peer technology, a shared folder simply makes a folder on your local computer available to workspace members without all the additional tools offered in Groove workspaces. Shared folders are compatible with Groove 2007 and SharePoint Workspace 2010.
Program Manager, SharePoint Workspace