Magic Formats
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There are many different ways to play Magic the Gathering; these methods of play are called formats. There are two broad categories of formats, constructed and limited. In constructed, players build decks before the game from cards in their collections. In limited, players build decks from a limited (hence the name) pool of cards, for example a draft or from sealed packs. Normal constructed formats either have a 1 or 4 'card limit' (where you can't play more than said number of cards with that english name), where as in limited, you can play as many as are in your cardpool.
Sanctioned Formats
These formats are sanctioned by Wizards of the Coast.
Constructed
Standard
Standard uses cards from the most recent sets.
Modern
Modern uses cards from 8th edition onward. probably the most widely played non standard format.
Legacy
Legacy uses all magic cards (except for those that are banned). WAY more powerful than modern but not as much as vintage, expect a mix of a few turn 1 win decks, grixis control and Death and Taxes (AKA the fun police deck, sound familiar? )
Vintage
Vintage is the same as legacy, only with a smaller ban list. WARNING this format is highly competitive and pretty much built around killing your opponent on turn 1, procede with caution
Commander
Main article: Commander
One of the best formats in magic(simply because its unsolvable, meaning that no one deck crushes everything else and you can build pretty much whatever you want.)Uses 100 cards decks, with only one of each card being allowed. One card is designated the commander; it is kept separate from the rest of the deck and may be cast at any time.
Pauper
Pauper, like commander, began outside of WotC. It is defined by cards that have been 'printed' at common. Normally defined as cards that have been 'printed' at common on MTGO. It has a ban list (which is not indicated on gatherer, but is on scryfall and WotC's B&R announcements).
Limited
Unsanctioned Formats
Constructed
Frontier
A new format that has created a lot of buzz in the community. Uses cards from the M15 set forward.
Kitchen Table
Fun games played between friends. All cards are allowed (unless the players decide otherwise), and players are expected to build decks of comparable power level to the other players, lest they become that guy.
Limited
Comparison (AKA Which Format is the Best/Should I Play?)
A note about pricing: Legal decks for every format can be built for about $10. Just don't expect them to be capable of ever winning a game or even remotely fun to play. Plan on spending at least $20 if you want to have fun.
A note about competitiveness: Top-tier tournament worthy decks tend to be expensive. This doesn't mean that cheap(er) decks can't win kitchen table, FNM or even take a small tournament by pure chance; but they will not hold up at the pro level. When deciding on how much you feel comfortable spending, keep your intended play environment in mind. If you aren't going to attend a grand prix, you don't need a $1000 grand prix winning deck.
Standard
+ Well supported (Wizards caters heavily to Standard and releases new sets constantly. R&D actually play-tests Standard. They also hold numerous tournaments for the format.)
+ Cheap(er) than other formats in the short term.
+/- Slower game.
+/- Smaller card pool.
+/- The current meta-game and card-pool favor decks that run expensive mythics.
- Less cheap in the long term (as sets rotate out, you will need to buy new cards to fill the holes in your deck).
Tournament Deck: Ramunap Red - $230
Budget Deck: Crocpatra - $80
Modern
+ Many different decks and strategies are viable.
+/- Fairly fast game.
+/- Large cardpool.
+/- The cards you use never rotate out (but the cards that you hate playing against don't rotate out either).
- Sort of receives support from Wizards, but not nearly as much as Standard.
Tournament Deck: Mardu Pyromancer - ~$1,050
Budget Deck: 8 Whack - ~$100
Legacy
+ Many different decks and strategies are viable.
+/- Fast game.
+/- Larger cardpool.
+/- The cards you use never rotate out (but the cards that you hate playing against don't rotate out either).
- Receives almost no support from Wizards.
Tournament Deck: Grixis Delver - $3000
Vintage
+/- Extremely fast game.
+/- Largest cardpool.
+/- The cards you use never rotate out (but the cards that you hate playing against don't rotate out either).
- Receives almost no support from Wizards.
- INCREDIBLY expensive to create viable decks.
Tournament Deck: Ravager Shops - $20,000
Commander
+ VERY Well supported and allows usage of all black and white bordered cards with the exception of a banlist (also recieves yearly set of preconstructed decks featuring new format exclusive cards.)
+ decks can be built for less than $50
+/- Can be a Slower game.
+/- VERY LARGE cardpool.
+/- practically anything goes depending on you allow in your playgroup or area (this means that very powerful decks exist that can potentially ruin games due to their back breaking strength.)
- while no commander is "the best", their are a lot of strictly better commanders in the format. a lot of them have a MUCH higher power level than most.
- Powerful decks tend to be VERY expensive (1000 and up)
+ cards hardly ever get banned.
+/- a VERY political experience and plays out very differently than any other format, can be considered quite unique.
+ Made for and by casual players.
- Has a Singleton Legacy Competitive Variant.
+/- The products wizards make for commander are Preconstructed decks that can be played right out of the box.
+/- Certain preconstructed decks are strictly better than others.
Tournament Deck: Food Chain Prossh - $1500
Budget Deck: Sygg, River guide - $80
Pauper
+ Budget: As you might expect from a format of mostly commons, most decks are rather cheap. Even so, some cards are still simply low supply, so getting a play-set of oubliettes for mono-black control could cost a pretty penny for people that are on a tight budget.
+/- Legacy lite. Despite being only commons, Pauper has its share of powerful cards. Like the artifact lands that are Banned in Modern.
+/- "Eternal". Cards don't rotate out.
- Pauper sees little, yet as of this writing (mostly) growing support from WotC (which can probably largely be credited by The Professor championing it). However, WotC has in one way incidentally cut back on supporting the format. Specifically in "masters" sets, they made downshifting rarities with adding cards to the pauper format in mind. However, now some people in R&D make cards with Pauper in mind, especially outside of Standard legal sets.
- No unified legality list. This of course fractures the pauper community. What is legal in one pauper tournament might not be legal in another pauper tournament happening at roughly the same time. For example, Card Kingdom has a different legality list than Channel Fireball. As such, if you want to go to a pauper tournament, be sure to look into that tournament's legality list (call up the tournament organizer if necessary). Hopefully a different legality list won't throw off your meta game expectations. Here is an article that goes over this problem somewhat nicely [1].