24 Ways has an excellent article on Transitional vs. Strict Markup
When promoting web standards, standardistas often talk about XHTML as being more strict than HTML. In a sense it is, since it requires that all elements are properly closed and that attribute values are quoted. But there are two flavours of XHTML 1.0 (three if you count the Frameset DOCTYPE, which is outside the scope of this article), defined by the Transitional and Strict DOCTYPEs. And HTML 4.01 also comes in those flavours.
The names reveal what they are about: Transitional DOCTYPEs are meant for those making the transition from older markup to modern ways. Strict DOCTYPEs are actually the default – the way HTML 4.01 and XHTML 1.0 were constructed to be used.
A Transitional DOCTYPE may be used when you have a lot of legacy markup that cannot easily be converted to comply with a Strict DOCTYPE. But Strict is what you should be aiming for. It encourages, and in some cases enforces, the separation of structure and presentation, moving the presentational aspects from markup to CSS.