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2) I have also experimented with Feedblitz and placed a "Enter Your email" form to enable visitors to my site to subscribe to email alerts which they receive every time a new post is added.
I do not have a complete understanding of this technology and have a very basic question - what is the difference between both? Which one is more useful for visitors and for the Blog owner?
I'd not actually heard of Feedblitz. It looks like a service you pay for that will send out e-mail messages to subscribers.
In my book RSS/Atom would win out over a paid 3rd party e-mail service for content notifications. E-mail is notoriously problematic for this due to filtering and other blocks. Even though e-mail may be opt-in somebody's eventually going to forget they subscribed and report you as a spammer. That could never happen with RSS.
Also, with RSS/Atom you have complete control of what is sent out and when. You can change that content any time you want. Once an e-mail is sent you can't recall it. XML feeds will reside on your server for as long as you want. If an e-mail subscriber deletes your mail that info is gone.
RSS/Atom and e-mail serve different purposes. If you want a newsletter then e-mail is great. RSS/Atom is a service that you provide to allow for syndication of your content and/or notification of new content on your site.