DLP and LCD Projector Technology Explained

LCD (liquid crystal display) projectors contain three separate LCD glass panels, one for red, green, and blue components of the image signal being transfered to the projector. As the light passes through the LCD panels, individual pixels can be opened to allow light to pass or closed to block the light. This activity modulates the light and produces the image that is projected onto the screen.

Advantages of LCD 
LCD is generally more 'light efficient' than DLP (ie. the same wattage lamp in both an LCD and DLP would produce a brighter image through the LCD).

With 3LCD projectors, you get beautiful colour in clear, defined images - even in a bright room, and you get more than double the brightness on colour luminance, compared to non-3LCD projectors. What’s more, 3LCD projectors can project bright, vivid images with a low output lamp. 
Hence, with a data signal, if you put a 1000 lumen LCD next to a 1200 lumen DLP and showed a colour image people would probably prefer the LCD for brightness.

LCD projectors are generally better where colour reproduction is critical, although DLP projector manufacturers are working towards a much better colour accuracy with the introduction of "Colour Enhancement Technology" from Optoma and "Brilliant Colour Technology" from BenQ and InFocus

Disadvantages of DLP 
•The 'rainbow' effect, appearing as a momentary flash of rainbow-like striping typically trailing the bright objects when looking from one side of the screen to the other, or when looking away from the projected image to an offscreen object. Only some people see this effect, or you can create it for yourself by moving your eyes very quickly across the screen. There are two types of DLP projector - the old ones had four segments on the colour wheel, the new ones have six or even seven and spin faster, which means less rainbow effect and more saturated colour.
•The 'halo' effect (or 'light leakage'). It may bother some people using their projector for home cinema. Basically it's a grey band around the outside of the image, caused by stray light being bounced off the edges of the tiny mirrors on the DLP chip. It can be a distraction, but can be overcome by having a black border a few inches wide around the screen, so the halo falls on to the border. However the halo effect is less evident in the newer DLP chips such as the DDR