Watch the Legato/Staccato online guitar lesson by Jeff Scheetz from Rock Tricks
When we talk about this technique, we can usually use common terms to describe each way of playing. Legato is usually described as "smooth", "fluid" playing, and staccato is more "choppy", or "broken up" sounding. Listen to players like Allan Holdsworth, or Steve Vai for legato stuff, and Al Dimeola or Steve Morse to hear some great staccato playing.
In the end, all of these players use both techniques, but their individual styles may lend themselves to one way being more dominant. Remember to practice both techniques, that way you can find out which style fits you the best!