Optical storage
Optical storage is when a plastic disk is marked, and a reader can translate those marks into 1s or 0s (bits) Optical storage is better than magnetic storage (hard and floppy disks) because it cannot be destroyed by electricity or magnetism. In fact with a ROM - read only memory - disk, the only way to destroy the data is to destroy the disk.
CD-ROM
These are the original optical media and hold 640mb of data. The earliest CDs had little holes burned into their surface with a laser, with the holes and the spaces between them making up the 1s and 0s.
CD-RW
This is a re-writable CD. Re-writable CDs were created by using a dye which changed when the laser hit it, but which could also be changed back.
DVD
There are many kinds of DVDs (Digital Versatile Disks). They use almost the same technology as CDs but they make the 1s and 0s much closer together by using light with short wavelengths. Ordinary laser light is too wide for these disks, which use x-ray lasers to work. The reason that there are so many kinds of disks is because every manufacturer has his own ideas of how to make DVD technology work, and though every idea works, some kinds of DVD can't be read by machines that are built for another kind. Eventually the public must decide which type they want to buy.