ORIGINAL: wings
Both AM and FM use the same 72Mhz frequency band.
FM signal changes the frequency back and forth between the carrier frequency and a shifted frequency that is very close the the carrier frequency.
An AM signal has a constant frequency but the signal is turned on and off to modulate or the signal.
Modulation is just a fancy word that means the transmitter transforms your stick movement into a language that the receiver understands. It's kinda like Morris code.
It's called Pulse Code Modulation. I explain it more in-depth [link=http://www.hooked-on-rc-airplanes.com/pulse-position-modulation.html]here on my website[/link].
AM uses signal on or off to represent pulses. FM switches between two frequencies to represent the pulses on or off.
Most radios today are FM.(or spread spectrum) Some say AM is more prone to interference, although I'm not 100% convinced that is accurate.
AM transmitters are limited to four channels, that's probably the biggest drawback I see.
If it's a really good deal I'd say get it. They work just fine.
But if it's a mediocre deal I would hold off and get FM or 2.4Ghz.
I hope this helps.
Where did you get the idea that only 4 AM channels are available? I have a couple of Futaba AM's with 6 and 7 channels. If speaking of 4 freqs/channels within the band, that is also not true. Not current production but still out there.