What makes them different is that they're not taxed and the interest you make on them are not taxed as long as you don't start cashing them in until at least 55 (in most cases).
I'm not entirely sure that is true. I thought that traditional IRAs were tax deferred, so that when you start withdrawing after you are 59 1/2 (or whatever age it is), you pay taxes on everything, but this is generally beneficial because it is assumed that you will have less "income" when retired than when working.
Additionally, there is a Roth IRA, which you contribute to after tax, and the portion that you contribute can be taken out tax free after you reach a certain age. You still pay taxes on the interest. My understanding is that you can have both a Roth IRA and a traditional IRA, both with $4K caps per year.
With limited acceptions, any withdrawls taken before that certain age are not only taxed, but are also hit with a 10% penalty (which is also paid to the IRS). This penalty is in addition to whatever penalty your bank/account holder has for early withdrawing.