Automatic - let Moodle figure out what to do (based on the type of file)
Embed - show a full Moodle page (with heading, blocks and file description), with the contents of the file shown within the page
Force download - the user will have to download the file and either save it, or open it in a program on their desktop
Open - just show the file (without any of the Moodle page elements - no heading, blocks or file description)
In pop-up - the same as 'Open', but creates a new browser window to show the file (without browser menus and address bar)
In frame - show the Moodle heading and file description, with the file displayed in a resizable area below
New window - very similar to 'in pop-up', but the new browser window has full menus and address bar shown

Note: for any file types that cannot be displayed in the user's web browser, an option to download the file will be offered instead of the above (but any pop-up windows will still be created).
Note2: the available options depend on the settings your local administrator has chosen.