Select "Software" only if you are using a cable that is substandard or possibly defective (one with only three wires, for example). Choosing Software says, in effect, "ignore carrier detection" and overrides checking for the physical existence of the connection. Use Software Carrier Detection only under unusual circumstances.

Select "Hardware" for most conditions. You must use it for a modem connection and should also use it any time you want to be sure that the physical connection exists.