Early Action
To apply Early Action, the deadline is usually somewhere around November 1st (varies by school) and you will receive your answer within a couple months. You still have until May 1st to decide and you can apply Early Action to as many schools as you want.
Early Decision
Early Decision time frames are similar to Early Action, except you can only apply to one school as Early Decision and if you get in, the decision is considered "binding." You have to pull your applications from everywhere else and attend that school. Even if another school gave you more money!
With both options, you find out earlier than Regular Decision applicants whether or not you're in. So why would anyone choose Early Decision and possibly put themselves in a tough situation financially? Well, there's one big reason.
Acceptance Rates
Early Action acceptance rates tend to be in line with Regular Decision. However, Early Decision acceptance rates tend to be higher. Sometimes, much higher. For example, at a recent info session at a small, elite New England college, we were told that for the previous year Regular Decision accepted 12% of its applicants and Early Decision accepted 50%.
Summary
So if you're on the bubble for your dream school, applying ED might push you over the edge into that accepted pile.
However, remember, if they accept you, you have to go. You can't compare and negotiate packages.
It's not an easy decision to make, and you have to think hard about what's best for you and your family long-term.