Currently, there are three different types of touchscreen technologies: resistive, capacitive, and the lesser known inferred. Though the three provide the same functionality, they have their advantages and disadvantages.

Resistive touchscreen displays have small dots separating multiple layers of film over the glass screen that are transferring currents. When pressure is applied on the screen, the top film layer makes contact with the bottom film later, creating a current. The current is then calculated to determine the location of the pressed area.

In capacitive touchscreen displays, current is being sent from the four corners of the screen. When you touch the screen, your finger changes the current and based from the change in current, the location is calculated.

With inferred touchscreen displays there are two forms of detection, heat-sensitive and optical. With heat sensitive inferred touchscreen panels  a warm object must be placed for the display to calculate the location. With optical inferred display panels, sensors on the device shoot an invisible grid and it calculates the location-based on the point of interference where the x and y position is interrupted.

When you compare the costs of the three different types of touchscreen devices, the resistive provides the cost-effective solution, followed by the capacitive touchscreen, and lastly the inferred touchscreen. Although resistive touchscreen provides the cost-effective solution, the downside is that they are poor visibility  allow only single touch use, and will wear over time. With a slightly more costly solution, the capacitive touchscreen provides the most bang for the buck; having a full glass screen with good visibility, multi-touch support, and only breaks upon major impact. The downside is that it requires a bare finger to operate the touchscreen. The most costly solution, the inferred touchscreen, provides the best solution. The device has full glass, good visibility, multi-touch support, and only breaks upon major impact.

More information can be seen on the infograph (from MyCricket)