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. A slower play style with a smaller pool of cards, ideal for beginners or people new to the idea of metas.
Modern
Modern uses cards from 8th edition onward. probably the most widely played non standard format. A mix of fast decks that kill you on turn 3/4 and decks that cheat out massive bombs. An expensive format once you’re ready for ‘big boy magic’
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 formats in magic. Uses 100 cards decks, with only one of each card being allowed (however may have as many BASIC lands as wanted). One card is designated the commander; it is kept separate from the rest of the deck and may be cast at any time.
Brawl
An officially sanctioned variation of Commander that uses different deck sizes and starting life totals, with the same card pool as Standard, essentially serving as "Commander-lite" with its own set of rules and separate ban list. Planeswalkers can also be declared as your Commander, even if they don't have the "this card can be your commander" line of text. Though it can be played on paper and on MTGO, it is most frequently played on Arena.
Pauper
Pauper, like commander, began outside of WotC. It is defined by cards that have been 'printed' at common. This has been a surprisingly complex issue [1]. But WotC has decided to finally settle the matter.
Pioneer
A brand new format similar to Modern, made because Modern has quickly stopped being "the format that you play when your cards rotate out of Standard." A more accessible format (hopefully) that starts at Return to Ravnica and continues on to the present set. Notable because the initial ban-list consists of ONLY the fetch-lands like Polluted Delta. Currently only on Magic Online, but it will eventually lead to paper events and is a stated long-term goal for the Arena team.
Historic
WoTC's solution to card rotation on Magic: The Gathering Arena. Instead of just lazily putting all the old cards in one queue like other digital card games, they plan on curating the format by infusing it with new cards from throughout Magic's history to push and nudge the format around.
Limited
Draft
Every player is given three packs, which are opened one at a time. You get the first pick from your pack, and then pass all other cards to the player next to you. You pick a card from that pack and then keep going until everyone runs out of cards from their packs. From there, you build a deck from your cardpool and face off against other players. Uses packs from the same block/set to give more cohesion and synergy.
Sealed
Like Draft but instead, you crack open 6 packs at the same time, and that's your cardpool. Often more powerful than Draft due to the higher chance of getting bomb rares/mythics. Usually found at prereleases for new sets.
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. Secretly this is the best way to play Magic.
Penny Dreadful
Mostly exclusive to Magic Online, this format has in its legal list all cards that are at 0.01 tickets at time of rotation, which happens whenever a standard-legal deck comes out. Intended to be truly budget friendly, that doesn't mean all cards are bad, it even has cards so busted that they are banned in other, major, formats, hence the price so low it enters PD legality, for example, many control decks have 4-of treasure cruise. Due to lack of support by wizards, like pauper at its first days, lobbies are found under "freeform" format.
Old School 95
This format consists of all sets between 1993-1995, meaning, like vintage, the power cards are legal (albeit still restricted). Although it can be found on MTGO, it really plays better in paper as mana burn is in effect and you can throw chaos orbs at your opponent's face.
Limited
Chaos Draft
Draft, but everyone uses random packs from throughout all of Magic's history (or whatever your store has lying around). Very difficult, and requires knowledge of limited formats from throughout potentially many different sets. Due to the random nature of packs it is very hard to build a synergistic deck.
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. Pretty playable sub $30 decks can be found on various deck websites, but they are locked into a pretty limited number of themes and pretty difficult to build without netdecking.
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. There are less combo decks than legacy, but the format is not entirely without combo. LSV actually considers its power level to be in between standard and modern.
+/- "Eternal". Cards don't rotate out.