Cloth nappies

This should answer all your Q's and probaby confuse you even more!
Cloth nappy board

Plain old fashioned white nappy are great for so many things- lining the change mat, mopping up spills, stuffing pocket nappys etc.
You can still use them the old fashioned way- people use snappi's to fasten them now intead of pins, and they need a cover. Or you can fold them into a pad and use inside a wrap/cover- like a real nappie cover that u can now by from foodtown/countdown/woolworths.

I found the old fashioned white nappies needed changing every hour! But the new inserts and pre-folds etc can last a lot longer.
I love my pocket nappies!!

My advice is too get a few different types/brands of nappies to try out when you have your baby. I'd get some prefolds and covers, fitteds, pockets and AIOs(all in ones). Then you can find out which system you like best and what suits your baby. They are in the smaller size for such a short time that by the time you know what you want you'll be into mediums anyway .
I started off using prefolds and pockets but now Esme is into mediums I'm looking at getting AIOs because they are really easy to use I've brought an itti bitti and a totsbots one and am currently leaning towards itti bittis. But I'll keep a few pockets because they dry fast and will be good as a back up during winter. For night we are still using desposibles mainly but are starting to use a fitted and cover but we only have one so need some more!
If you want to get an idea of what products are out there check out the nappy hunt http://www.diaperdecisions.com/pages/duh_huntlist.php it'll take you to lots of the different places to get nappies plus you'll learn heaps about them at the same time.

My advice would be the same as Esmes Mum. Don't get too much to start with cuz it might end up backfiring on you. The reason I say that is because before Bethany was born I bought a full set of prefolds/fitteds from snazzipants for the first year. However because Bethany was such a heavy wetter and hated being wet, I was still changing her umpteen times a day when she was 5-6mths old. At that point I gave up, tried a few other kinds and ended up on disposables for a while before discovering itti bittis when she turned 1. In saying that though, the prefolds were great for the first few months (once she finally fitted them at 10wks old :P)! I'm hoping they'll work a treat for #2 as well, and the itti bittis even better :-)

Oh and in answer to part of your other question - the diff between prefolds and the old fashioned nappies is the way they're sewn together to be a smaller size with extra layers which makes folding them easier. Basically it simplifies cloth nappies. And makes them a little trimmer so bubs doesn't have such a big bottom. My friend started off with the old fashioned nappies and hated it, then found prefolds and fell in love with cloth nappies. Unfortunately it didn't work the same for me tho lol :P

If you're in Auckland, I def recommend a visit to the snazzipants shop cuz they're really helpful - and their nappies are even organised according to cost :) I guess the bottom line is: yes, old fashioned cloth nappies are cheaper, but if you hate using them and end up using disposables as well (or instead) then that adds to their cost. However if you find a cloth nappy system that you use and love (and YAY for you if that's the old fashioned ones!) you'll be less likely to use disposables and therefore the cost will be worth it.

My theory is that the cloth nappies really pay themselves off once you start using them on subsequent children :) Anyway, each to their own - get a few diff ones to try and see what you and your bubs prefer once he/she arrives