'Normal' mode uses your computers 3D hardware (usually the graphics card, but some CPUs also have some form of hardware acceleration for 3D graphics) to display the wireframe views of the coaster you see in the editor window.
Software mode makes no use of any 3D graphics hardware you have, and puts all the load of this on the CPU, (it also won't make use of any 3D optimizations the CPU may have, AFAIK).
The upshot of this is that on most systems, software mode will be noticably slower. But, as Matt has noticed, it is also more reliable.