Is needed when you have your own router that is doing NAT and DHCP. You don't need the LAN IP address. If you are using the 3102 with an existing router just imagine the LAN port/address isn't there. Connect the WAN port to the router, enable web management on the WAN interface and that's it. You don't need the NAT feature or DHCP server as your existing router is taking care of this. The 3102 would provide these services to devices connected to the LAN interface but you shouldn't have anything connected to it. There is no QOS (Quality of Service) in this mode. This means that the ATA could not have enough bandwith in order to make a quality call whilst you are downloading heavily.
Is needed when you want the ATA to act as your router. All port mappings or changes need to be done into the ATA. In this mode the SPA can take care of the QOS (Quality of Service) a networking term that specifies a guaranteed throughput level. The networks consist of 2 internal network ranges. The LAN side of the ATA could be 162.168.0.x and the WAN side 192.168.1.x (which is equal to your modem/router network range).