The oracle type-2 driver requires the Oracle Client to be installed on the client machine. The java application talks to the oracle driver, the driver talks to the oracle client, the oracle client talks to the database.
The type 4 driver is a pure java solution. The application talks to the driver, the driver talks to the database. It is also the 'preferred' solution since it is all java. You can wrap up the whole thing and give it to someone and say "here's a java database application", where as an application using the type 2 driver would also require them to install the oracle client too.