Mr. Way Huge on various bypass methods

Buffered:
(This is what Boss, Ibanez, Digitech pedals use)
The signal always goes through active circuitry in the effect. The signal is bypassed either through electronic switches or through a variable gain amplifier.
Pros: Ability to drive long signal chains, isolating guitar from load, completely silent switching.
Cons: Requires power for any signal to pass through, loss of high end tone when multiple pedals are in series.

Hardwire:
(This is what vintage MXR pedals use)
The signal output is connected to a mechanical switch that toggles between the output of the effect or the input signal. The input signal is always connected to the input of the effect, but the input impedances of most effects are usually on the order of mega ohms. This in theory should not cause any problems, but many guitarists can hear the difference (or so they say!).
Pros: Super simple, cheap, works for most people.
Cons: Apparent signal loss due to loading can be aggravated with multiple hardwire bypass effects chained together.

"Clinton Bypass" or almost-true bypass method:
(This is what Voodoo Lab pedals use)
The signal output is connected to a mechanical switch that toggles between the output of the effect or the input signal. The input signal is always connected to the input of the effect by an FET or LED/photo-FET optoisolators. However, the input impedances of most effects are usually on the order of mega ohms. This very large off resistance is almost as effective as is an open mechanical switch, but many guitarists say they can hear the difference (or so they say!).
Pros: Simple, works for most people.
Cons: Apparent signal loss due to loading can be aggravated with multiple hardwire bypass effects chained together.

True Hardwire (True Bypass:
(This is what Fulltone, Way Huge, Zvex and many boutique pedals use)
Both the input and output of the effect are mechanically disconnected in bypass. The signal has a clean, untouched path from in to out. This requires at minimum of a DPDT switch. In recent years a 3PDT switch has been used to achieve true hardwire bypass with an LED.
Pros: Makes people happy. No signal loss when power cuts out. Keeps signal clean when pedal is disengaged.
Cons: Costs more to implement, can’t drive long chains, possible switching ‘pop’. When many true bypass pedals are chained together and there are long cables from the pedals to the guitar and amp a large capacitance can build up from the long cable runs (including all those little patch cables and the wires in the pedals themselves) causing substantial high end loss.

“Millennium Bypass” or modified ProCo RAT bypass:
This bypass method is a rather simple yet totally effective, and is a genuine true bypass with an indicator based on the DPDT. The signal input toggles between the effect input and the output jack. The effect output toggles between the output jack and the LED circuitry. The switching is such that when the input jack selects the effect input, the effect output is connected to the output jack. When the input jack selects the output jack for bypass, the effect output is connected to the LED switch circuitry.
Pros: Makes people happy. No signal loss when power cuts out. Keeps signal clean when pedal is disengaged.
Cons: Costs more to implement, can’t drive long chains, possible switching ‘pop’. When many true bypass pedals are chained together and there are long cables from the pedals to the guitar and amp a large capacitance can build up from the long cable runs (including all those little patch cables and the wires in the pedals themselves) causing substantial high end loss.

Relay True Bypass:
(This is what the Line 6 DL4 uses)
In addition, electromechanical relays can be used instead of a mechanical switch to do the effect bypassing. Hardwire Relay and True Hardwire Relay are basically the same as their switch counterparts. The difference is that the relays are switched by a small current sources sent from the foot switch instead of the switch actually switching the audio.
Pros: Usually there is a shorter distance from the input jack to output jack when in bypass mode and it reduces the chance for capacitance (high end loss) and noise. More robust foot switch can be used leading to longer foot switch life. No signal loss when power cuts out. Keeps signal clean when pedal is disengaged.
Cons: Requires more power and reduces battery life. Costs more to implement, can’t drive long cable runs, possible switching ‘pop’. When many true bypass pedals are chained together and there are long cables from the pedals to the guitar and amp a large capacitance can build up from the long cable runs (including all those little patch cables and the wires in the pedals themselves) causing substantial high end loss.

More info here on bypass:
http://www.geofex.com/Article_Folders/bypass/bypass.htm