Whats the difference betweel this options:

On connect, allways get:
Local Host or IP Address

Lookup method:
Normal or Server

They affect how your IP/DNS information is pulled. Local Host is your DNS mask, and IP is your IP address. Normal and Server affects how it's pulled and depend on your setup. Usually one will pull your local IP/DNS information and the other will pull your public IP/DNS information.

So when would you use the one or other?

You use whichever works for you. In most cases, the defaults are all you ever need.