The Woody installer installs the current Debian Stable release. The Sarge installer installs the current Debian Testing development branch. The Sarge installer is a beta version of the new Debian installer and it's much easier to use than the old Woody installer.
There can only be one Debian Stable release at a time. But there are also two development branches: Testing and Unstable. The current Stable release (3.0) is called Woody and the current Testing branch is called Sarge. Sarge will soon become the next Debian Stable release (3.1) -- possibly within a month or two.
The Stable release is generally recommended for server use and as the desktop for users who just want the stablest possible desktop. The applications in Stable release are usually old but very thoroughly tested and bug-free.
If you want more up-to-date applications you should go for Testing, but be warned that Testing is a development branch and you may encounter some bugs. Unstable is for experienced users and system developers who can handle occasional bugs that can totally crash your system. If you choose to install Testing or Unstable development branches, I'd recommend that you'll also install the apt-listbugs package as soon as possible.
More info here:
http://wiki.linuxquestions.org/wiki/Debian
