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When Netflix was co-founded in 1997 by Reed Hastings, DVDs were a new format and most of the movie rental stores were still populated with videotapes and one of their big sources of revenue came from late fees.

Hastings' concept was to rent just DVDs, with no late fees, (actually in the first years, they also sold DVDs) and to run his business online, with no brick and mortar stores. Movies were mailed to their customers, who mailed them back when they wanted.

At first, Netflix implemented a traditional per movie rental plan. By 2000, Netflix switched to their now familiar flat fee, unlimited rentals model.

Over the years, they have established a pricing structure based on how many DVDs that you could have at one time.

For example, currently, the one DVD out at one time plan costs $9.99 a month ($11.99 with an option to rent Blu-rays). Two DVDs out at one time goes up to $14.99 a month ($17.99 with an option to rent Blu-rays), three DVDs choice is $19.99 ($23.99 with Blu-ray).

You can keep the DVDs as long as you want, but if you do you are really not getting full value from your subscription. Avid movie watchers (with a two or three DVDs at a time plan) can almost keep a constant flow of DVDs by seeing the movie the day it arrives and mailing it back the next day.

The next shift in Netflix's distribution model entailed streaming movies over the web. At first, you could only watch on your computer that was connected to the Internet.

More recently, devices like Blu-ray players and media boxes like the ones from Roku allow you to connect directly to Netflix, no computer is necessary. And in the last year, we have seen a proliferation of TVs that supply a Netflix app.

Netflix is promoting this streaming model over its postal delivery system and you can understand why, Netflix's cost of mailing those red envelopes last year was over a half of billion dollars. (That's B for billion.)

To prod subscribers towards streaming, Netflix now offers a $7.99 Watch Instantly Unlimited plan that allows you to stream content onto your Mac, PC or TV (or iPad, Blu-ray player, etc.). "Unlimited" means that you can watch movies until your eyes pop out of their sockets.

Under this $7.99 plan (and the $9.99 plan of one DVD at a time + streaming), Unlimited does not mean that you can initiate two streams at the same time. If you have a family of Netflix streamers, you could see where that could cause a problem, which can be solved by opening up a second or third account.

Another solution is to subscribe to either the two DVD or three DVD option, which allow for concurrent streams.

I would definitely suggest that you do subscribe to a plan that combines streaming and DVD mailing because the selection of titles that you can stream pales in comparison to the choices available by mail.

For example, from the Netflix Top 100 list, only nine titles are available to stream. All the rest are offered by Netflix as DVDs only.

If you are an Independent movie fan, the percentages are better. By my count, in the category, Indie Suspense & Thriller, Netflix lists 276 DVD choices, of those, 94 can be streamed.

I also found that same one third ratio with Classic movies, 3909 choices on DVD and 1301 available to stream.

Why is there such a disparity between the number of DVD titles that can be mailed to you and the choices that you can stream?

When Netflix opened, they were following the legal practice of movie rental stores. If you owned the physical videotape, you could rent it. In the same way, Netflix went out and purchased multiple copies of DVD movies and rented them, one at a time.

Over the last dozen years, they have amassed a library of movies on DVD and Blu-rays. If you subscribe to a DVD plan, you can have any one of those movies (and TV shows) mailed to your door. (Netflix doesn't list an official number of DVDs that they have in their library, but I have read estimates of over 100,000 titles.)

For Netflix (and any other legal movie distributor) streaming is a different business model that requires that Netflix acquires licensing rights from the content owners, which are often the movie studios like Warner Brothers.

In the simplest terms, Netflix is licensing one copy of the movie and streaming it to multiple customers and the studios want their piece of the pie. Studios also want some say on other issues like when a title can be streamed and for how long.

For Netflix, the usual streaming window begins no sooner than 28 days after the DVD is released (and often much later than one month). How long the stream is available varies, therefore if you see a movie pop up as a streaming choice, don't assume that it will stay there forever.

Because Netflix can only stream titles that they have licensed, the number of choices is quite a bit less than the huge catalog of DVDs that can be mailed.

Licensing is expensive, but luckily streaming has attracted a new customer base and Netflix has doubled its subscribers in the last few years to over twenty million. Also the shift to streaming reduces its mailing costs, which gives it more capital to spend on licensing.

For Netflix's push into streaming to be successful and sustainable, Hastings realizes that they need to constantly expand their offerings. Just last week, Netflix announced a two-year non-exclusive licensing agreement with CBS for current and catalog shows like Frasier, Medium and Cheers.

Of note, at this time, Netflix does not stream any 3D movies, though they do offer a few 3D Blu-ray movies through the mail. (I asked Netflix when they might start streaming 3D movies. Their response to this and other questions that I posed was, "Unfortunately we are unable to grant you this interview due to time constraints.")

Therefore, as I am writing this in early 2011, the bottom line is that if you expect to be able to stream all of the newest and most popular movies on Netflix, you will be sorely disappointed.

With that said, the catalog of films and TV shows that you can stream is extensive. And for eight bucks a month, Netflix offers quite a bargain. Though I would upgrade to at least one DVD at a time plan to avail yourself of all the mail-only content.

If you are wondering if Netflix will work for you and your system, they offer a one month free trial, which should give you plenty of time to test its selection and quality for yourself.