The standard notification is that email is sent to users when a new issue is added to the database and when an existing issue is updated.
Fundamentally, email notification is sent to all users whose names appear in any user list field. In addition, you may set up interest lists based upon the values in a list. For example, send notification to the Vice President of Support when a Critical issue is updated, or send email to the Product Manager when his product is chosen in an issue.
As opposed to the standard notification, email templates can be easily configured to communicate with users at any point in the workflow. You can use email notification rules extensively to further define who gets which emails and when they receive them.