From essentially the introduction of the EOS camera system in 1987 through to 2003 Canon standardized on a single lens mount system for all of their SLR cameras - the EF (electrofocus) lens mount. So throughout this time there was no possible source of confusion, since all EF lenses made by Canon and other lensmakers will physically fit all Canon EOS cameras.
However, in 2003 Canon introduced a new digital camera, the consumer-oriented EOS 300D/Digital Rebel/Kiss Digital camera, which sported a new lens mount design dubbed EF-S. All consumer to midrange digital EOS cameras released since have been both EF and EF-S compatible. For reasons explained in a moment, no film camera has ever been EF-S compatible.
So it�s important to remember that digital camera bodies with EF-S lens mounts are totally compatible with all regular EF lenses. However an EF-S lens can fit only EF-S compatible cameras and no others. (unless the lens is altered - see the section on hacking below).
EF-S bodies have small mirror boxes - roughly 2/3 the size of a regular EOS camera (also known as a 1.6x cropping factor) - because they use image sensors which are smaller in area than 35mm film. They, and APS cameras which similarly used small imaging areas, are thus often called subframe cameras. Cameras which use 35mm film or which use large sensors that are the same size as a frame of 35mm film are commonly called full frame cameras these days.
EF-S cameras thus support lenses with a shorter back focus distance than EF lenses, because the mirror swings further back. This is where the �S� comes from - EF-S lenses have shorter back focus distances. (ie: the back part of the lens can get physically closer to the image sensor since the mirror is smaller) Having a shorter back focus distance allows Canon to produce cheaper wide-angle lenses that work with the smaller image format of a subframe digital SLR, since it�s optically very challenging to create a wide angle lens with a long back focus distance.
Canon have a small but growing series of EF-S lenses available, ranging from inexpensive kit lenses to very good high-quality lenses with image stabilization. There�s even a very interesting 60mm macro lens with an EF-S mount. The super wide angle EF-S 10-22mm 3.5-4.5 USM (roughly 16-35mm coverage if it were full frame) is particularly well regarded, as is the EF-S 17-55 2.8 IS USM, which is an L lens in all but build quality and name.
The main issue to be concerned about with EF-S is the future value of the lenses. Right now full-frame image sensors are extremely expensive to make, which is why nearly all digital SLRs out there have image sensors smaller than that of a frame of 35mm film. But in the future it�s likely that prices on such sensors will drop, at which time full-frame digital SLRs will become more affordable and thus EF-S lenses will no longer be of use except on pre-existing cameras. The two questions are - how long will this take and will you be able to get good use of your investment in EF-S lenses before this occurs? The first nobody knows the answer to, and the second can only be answered by you. For the time being it seems likely that it�ll be some years before affordable full-frame sensors are ubiquitous, so EF-S lenses aren�t necessarily a bad idea, assuming you aren�t planning on upgrading to full-frame as soon as you c
