First of all this discussion only matters if you are producing something that needs to be time accurate in NTSC, (standard definition) video. Examples are TV commercials & programs.
Drop Frame and Non-Drop Frame write address positions for specific points on video clips, tapes, and programs differently.
Non-Drop Frame is “frame accurate”, a specific number or address corresponding to each frame of visual media. But in NTSC video, 30 non-drop frames do not equal one second of time. Drop-frame IS time accurate. This can be confusing. Why would you “drop something out” to make something called “timecode” time accurate? For this article I’m not going to go into why this is and instead talk about knowing which to use.
Drop-Frame refers to what I’ll call “time distance” on your video clip, tape, or program. Reading the drop-frame timecode tells you where you are in terms of actual chronological clock time as opposed to how many frames have gone by.
Drop Frame tells time while Non-Drop Frame counts frames.
A good rule of thumb is that if it’s for broadcast television, use drop-frame. Otherwise it doesn’t really matter.
You can shoot in either really but edit your program in drop frame to make it time accurate, but it’s better to be consistent.
Also, there is no difference in quality or content between drop and non-drop timecode. Timecode numbers are dropped not video frames.
Additional resources for this article are;
Pam Malouf-Cundy, who has a very detailed explanation at http://csif.org/html/dropframe.html
And Larry Jordan, Bob Sloan endorsed guru of video production, http://larryjordan.biz/