What is the difference between a software, hardware, or firmware based RAID?

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Most ATA RAID host adapters (except 3Ware Escalade, Adaptec 24x0, Areca, HP/Compaq, IBM ServeRAID, Intel SRC*/ICP Vortex, LSI Logic MegaRAID 150-4/150-6, and Tekram) turn out, upon examination, to not be real hardware RAID, but rather software/BIOS-dependent fakeraid. (I.e., missing hardware functionality is traditionally emulated inside idiosyncratic, undocumented, and proprietary software drivers, to hit low price points). Fakeraid is difficult to support in Linux — absent either reverse-engineering, special proprietary drivers, or (rare) manufacturer cooperation. (HighPoint, LSI Logic, Nvidia, Promise, and VIA provide proprietary drivers to support their respective fakeraids. I personally would steer clear.)
Linux often cannot read existing fakeraid volumes on such host adapters, unless you're willing to use proprietary fakeraid drivers (where available). But unless you're dual-booting MS-Windows, you shouldn't care, because Linux's software RAID (kernel "md" driver) is much faster and more reliable. You're advised to blow away fakeraid volumes, use SATA drives as straight block devices, and enable Linux software RAID instead, during Linux installation.
Kernel coders are slowly figuring out some fakeraid variants, and coding ataraid/dmraid modules.

Setting up a software raid with Linux:
The "Linux" Software-RAID HOWTO http://tldp.org/HOWTO/Software-RAID-HOWTO.html
More info:
RAID http://en.wikipedia.org/wiki/RAID
RAID Levels: http://en.wikipedia.org/wiki/Nested_RAID_levels