A dvd decoder can be hardware or software.
If you have a faster computer than a software decoder will be fine. If you use a program like windvd it has its own built in software decoder. Alot of other different software dvd players have their own built in software decoders.
If you have a slower computer then a software decoder will work but it may be choppy and probably not what youre looking for regarding dvd quality. If thats the case then you want a hardware decoder because it takes the burden away from your cpu and uses the power of the hardware decoder to decode the dvd. Im not sure how much they are now but i figure they cant be more that 50 bux on ebay...i would think more around 20-30.