When I bake bread, I always use my loaf pan. Recently, I've seen some people who bake bread in a Dutch oven (or something similar). Why is this? What are the differences between the two?
There's two important distinctions:
The dutch oven is preheated, so the oven conveys a lot of heat, rather quickly. This causes some steam to be pretty much immediately made.
The dutch oven is covered. This traps the steam previously made. This is trying to replicate steam injection and the goal of most methods that cover the loaf.
Steam keeps the crust from hardening and promotes better oven spring and crisper crust. The steam basically allows the bread to 'swell' more in the oven. Steam also gelatinizes the starches in the crust and formes a better 'shine' and 'crisp' on the finished product. The dutch oven is then uncovered after awhile and the crust hardens.
In addition to rfusca's quality points, the dutch oven is very helpful for eliminating hot spots in the oven, leading to a more even rise across the loaf.
Another difference is shape. A loaf pan directs the dough into a specific shape as it cooks (and as the oven spring makes it expand), while loaves cooked in a dutch oven are free to expand outward. This results in a lower, broader loaf.
I believe that the loaf pan's restriction may also result in a tighter crumb, and I would be grateful to anyone who can confirm or refute this.