Auctions are just as the name implies. Its an auction that users can bid on your item. This system works just like eBay with Buy it now future, Proxy bidding and set duration. Once transaction is complete you will be able to rate each other on the transaction.
Products adds a listing to the site that allows users to buy it immediately using the shopping cart and pay you via paypal immediately. This type also gives you the ability to add a quantity, Offers, Shipping and Insurance costs. The transaction will be saved in your account. Once transaction is complete you will be able to rate each other on the transaction.
Classifieds. Is similar to craigslist. It will create a classifieds type ad and the potential buyers will contact you via the website for more information. The transaction for purchase happens off site and handled directly between the buyer and the seller. No rating will occur with this transaction type.