Yes, coldforged's headlines plugin is the former type I outlined above.
There's actually a third (though I haven't seen it for WP), which is a JS image-replacement method, but uses a graphic off the server.
The advantage of the server-side stuff is you just drop some ttf's into a folder on the server and it's pretty much ready to go. Also can easily add coloring, drop-shadows, and other post-processing effects. The downside, however, is that it isn't super SEO-friendly to do titles as graphics (even though as links the link title would give some SEO info).
The advantage of client-side is that the search engines/bots all just see the source textual representation -- the transformation to 'graphics' happens in browsers with JS support. It's also less workload on the server, as the font(s) are downloaded once, then used for every title/heading needed, versus a custom image for every possible title. Lastly, newer versions allow text selection, as if it was really just normal text. The disadvantage of sIFR specifically is the generation of font files (though you can download pre-made files), and that sIFR 2 had limited visual features. The upcoming sIFR3/FlashyTitles3 uses newer tech, fits better into page flow, and can do anything Flash 8 tech can do (i.e., shadows, knockouts, emboss, glow, etc., etc., etc.).
So, really depends. ;) But anyone doing heavy SEO work will avoid server-side-only solutions when possible.