A visual answer
Imagine a <span> element inside a <div>. If you give the <span> element a height of 100px and a red border for example, it will look like this with
display: inline

display: inline-block

display: block

Code: http://jsfiddle.net/Mta2b/
Elements with display:inline-block are like display:inline elements, but they can have a width and a height. That means that you can use an inline-block element as a block while flowing it within text or other elements.
Difference of supported styles as summary:
- inline: only
margin-left,margin-right,padding-left,padding-right - inline-block:
margin,padding,height,width