Obviously this is fodder for a future article, but here's a mile-high view of Microsoft's three document sync solutions. Right now, the company makes three:
For starters, they're all free.
The first two are largely identical sync platforms, except that Live Mesh includes a cloud-based Web desktop, which FolderShare is peer-to-peer (P2P, or "PC to PC") only. Both are automatic. So if you change a file in a synced folder, that file is changed, immediately and automatically, on all synced PCs (and, with Mesh, on the Web desktop as well).
That said, Live Mesh is a tech preview right now, and the folders sharing feature is proof of concept only. Once Live Mesh goes RTW, you can expect that solution to disappear. FolderShare will be moved to the Live Mesh platform in the future. So FolderShare is arguably the future of Live Mesh's folder sharing functionality.
Both Live Mesh and FolderShare work across the Internet. So PC1 could be a laptop in Seattle and PC 2 could be a desktop back home in Massachusetts. As long as both PCs are on and online, folder sync works properly (immediate, automatic) with either solution. (Live Mesh TP current offers other functionality as well, of course, including remote PC access.)
SyncToy 2.0 is P2P only and its designed for PCs that will be used on the same local network. (There are 32-bit and 64-bit versions available for Windows Vista.) So it's a good solution for backing up as well as for syncing data from PC to PC. Unlike Live Mesh and FolderShare, however, SyncToy is not automatic or immediate. It needs to be run manually or, using the Windows Task Scheduler, on a regular schedule. You may schedule sync to happen overnight, for example.
It's possible (and even desirable) to use two of these tools (Live Mesh or FolderShare) in tandem with SyncToy, depending on your needs. It does not make sense to use Live Mesh and Folder Share together.
None of these tools are currently Windows Home Server savvy. You should not try to run FolderShare or Live Mesh on WHS. If you do, you will lose data.
I now use FolderShare (instead of Live Mesh) to sync data between folders on my desktop PC and two laptops. I use SyncToy 2 to backup data from my main PC to various other machines on a regular basis, and to external drives for duplication purposes.