Traditional water heaters use the "heat rises" principle to separate hot and cold water inside the tank - cold water is stored at the bottom while hot water is sent out the top. Available in gas or electric models, water heaters are comprised of the following parts:
Recent innovations in water heaters have done away with the need for massive amounts of water storage and the water heaters used in today's homes are tankless - meaning they don't have storage tanks. Tankless water heaters supply an endless amount of hot water on demand with no need for stored water and save energy by eliminating standby losses.
A tankless water heater's gas, propane or electric heating device is activated by the flow of water. The heater is rated by how much it can raise the water temperature per minute.
If you're looking for a tankless water heater that allows you to run two hot showers simultaneously (not all of them do), then you'll want to get one that can heat more than 5 gallons per minute by 60 degrees Fahrenheit.
Tankless water heaters are quickly becoming the norm in new homes and in old home renovations. They are more economical to operate than the traditional tank water heater, and most consumers find that they perform more consistently and reliably. There's little wait for the water to warm up because old cold water doesn't have to be ejected from pipes before the tanked hot water reaches your tap.
However, if you have a tanked water heater, you can retain its efficiency (and your hot shower!) with regular maintenance and insulation.