Reels can cost from $9 to $700, and that's just at Cabela's. There are some basics that all reels share that we should discuss before we talk about the different types.
There are three basic types of reels:

Spincast reels are the ones we had as kids, the classic Zebco reels. These are essentially upside-down spinning reels, enclosed in a metal front, with a push-button release on the back. These mount on the top of baitcasting rods. About all I can tell you about these is that they are simple to use, but they have serious drawbacks in that they do not cast as far as other types and, well, aren't as "cool."
Spinning reels are (usually) open-faced reels that hang below spinning rods. The line is wound on the spool perpendicular to the rod. This are probably the most common type of reel. Most have reversible handles and therefore usable by either left- or right-handed people.
There are two basic configurations of spinning reels, the difference being in where the drag control is located. Basically there are front- and rear-drag models.

This is a front-drag reel: that knob on the front of the spool is the drag.

This is a rear-drag reel: the knob on the back is the drag. With all drags, you turn the knob one way to tighten and one way to loosen.
I greatly prefer front drags. Rear drags are easier to use when fighting fish. But (and this is a big but) they are MUCH harder to take apart than front drag models. I take mine apart to clean and lubricate them at the beginning and end of every season, plus every time that I drop one in the water (which of course never happens). There are fewer pieces in a front-drag model to lose or forget the order of, not to mention that I haven't actually been able to figure out how to get my rear-drag reels apart.
Baitcasting reels are reels for purists. They are the oldest kind of reel. The line and spool are parallel to the rod, and mounted on top of the reel. One controls the speed of the line playout when casting by applying pressure with the thumb of the casting hand directly to the line on the spool. If you do not control the speed of the line, the spool will rotate too quickly, resulting in a hideous bird's nest of line. This is why they are difficult to learn to use. However, once you learn to use them, you can cast farther and more accurately than with any spinning reel. But they aren't for every one, and I don't recommend them unless you get fairly serious about fishing.
The phenomenon of the overrun, or bird's nest, deserves a bit more discussion. Older reels are just spools, drags and releases. Modern baitcasting reels have magnetic anti-overrun devices. These are usually a knob that you can adjust to brake the spool, to prevent it from turning too fast. So, as a beginner you can crank the magnets way up. That way you won't get the casting distance, but you have more control. As you gain confidence and ability with the reel, you can turn down the magnetic braking and control it with your thumb. This will allow you to get the casting distance that is possible with a baitcaster.
There are two types of baitcasters.

This is the classic round baitcasting reel, the Abu Garcia Ambassadeur, $70 at Cabela's. The star-shaped dial by the handle is the drag control.

This is a low-profile baitcaster, similar to mine. This one is $120 or so at Cabela's. Again, the drag is the star-shaped lever by the reel handle. These are lighter than round ones but hold much less line. I think they are easier to use, but I don't have a round one, so my opinion is biased and not founded in anything.
Overall, I think that for a beginner, a spinning reel is the best bet. Once you decide whether you want to take it to the next level, you can move up to a good baitcaster.
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