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Colour signals
Video signals undergo a terrible form of compression: all those infinite frequencies of the visible color spectrum are represented by only three different colors (frequencies)! The reason they can get away with that, is that it's based on the physiological peculiarities of the human eye. We simply don't see the difference!
The information about the three colors at any moment is called the video signal.
To broadcast the video signal so it could be picked up in our homes, they had to group the colors together and the coding technique was called NTSC. Soon some problems became obvious, especially variable color shifting during transmission through the air. But by then all American TV sets were able to decode NTSC-signals - and nothing else. In Europe they didn't have color broadcasts at the time, so they could come up with a solution: a different way of coding the video signal, which was called PAL. As a result, all TV sets in the US, Canada and Japan can now only decode NTSC signals. All sets in Europe (except in France and Russia) and Australia can decode PAL, and recently most of them NTSC as well.
The digtal nature of the data on DVD made it less desirable to try and code the data as either NTSC or PAL. Instead, they kept the three colors separate, but they used a trick (had been used before): of two colors they record the signal strength and the third value is the total strength of the colors (the brightness). Thus you can easily compute the third color, while in practice a signal is present that can be used in older B/W devices.
To serve older color TV-sets, the DVD-player is able to combine the colors into either NTSC (America, Japan) or PAL (Europe, Australia), and this signal is called the composite color signal. It's less desirable, because immediately after it has just been combined, the TV set will have to split it up again (as it always does) with something called a "comb-filter". The quality of the resulting color image is heavily dependent on the quality (price!) of the comb-filter.
Better use the recorded information, called S-Video (US) or S-VHS (Europe). If your monitor (TV-set or projector) has S-Video input, this is a huge improvement over composite!
Some DVD-players (and all DVD-drives inside PC's) can compute the pure three-color information themselves. This is often called RGB-signal or component signal. In fact the latter term is a bit inaccurate here, because the S-Video is a component signal as well!
You will understand that using the RGB-signal may offer a slight improvement over S-Video (if the decoder is good), but certainly not as much as going from composite to S-Video!
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