FM
From Freeradio
FM, or Frequency Modulation, is a way of modulating - or transmitting information (such as audio), on - a radio carrier wave. Although often used to mean the VHF FM broadcast band (87.5 to 108 MHz in the UK and most Western countries), FM can (theoretically at least) be used on any frequency.
In addition to FM broadcast radio, FM is also used for TV sound (6MHz above the video carrier).
Disadvantages of FM over AM
(NB The reason we're starting with the disadvantages of FM isn't necessarily because there's more disadvantages than advantages. It's just that, once the disadvantages are explained, it makes the advantages easier to explain :-) )
AM, or Amplitude Modulation, is the simplest form of modulation to implement - by contrast, FM transmitters are harder to design and construct. (FM receivers also used to be more expensive due to increased complexity, but are now so cheap as to be commonplace).
FM uses a larger bandwidth than AM. The AM bandwidth is determined purely by the maximum modulating (eg audio) frequency, fmod, and is: Bandwidth = 2 x fmod For FM, however, the bandwidth is determined by both the modulating frequency and the frequency deviation fdev - ie the difference of the frequency, at the maximum modulation (eg the loudest audio), from the carrier frequency. The greater the deviation, the lower the noise and distortion, but this comes at a price of increased bandwidth. FM Bandwidth = 2 x (fmod + fdev)
For the above reason, FM is not really suitable for quality broadcasting at lower frequencies (such as medium wave) where bandspace is in short supply. 2-way radio communications such as Citizens Band use a variant of FM called Narrow Band FM (NBFM), using low deviation and with a low maximum modulating frequency, but this is not really suitable for broadcasting music etc. because of the relatively low audio quality.
FM is not really suitable for Short Wave because it is easily degraded by fading and propagation disturbances. (Although a few Short Wave pirates are understood to have used NBFM in the past).
The maximum range of FM is lower than that of AM, because an FM signal disappears altogether when it disappears below the noise or interference. AM signals, by contrast, can still be heard below the noise (although whether or not they're still listenable is debatable).
Advantages of FM over AM
FM signals are less prone to receiver interference, from a distant station on the same frequency, or from man-made or natural noise (such as lightning), because an FM receiver's "capture effect" selects the strongest signal.
Because the FM bandwidth is not entirely dependent on the maximum frequency, extra features - such as Stereo and RDS - can be carried on sub-carriers. These are at frequencies above the highest audio modulating frequency, at a lower deviation. (This is why an FM station may sound clean in Mono but hissy is Stereo).
FM signals cause less Interference to neighbours' audio equipment, or to the station's studio equipment, than AM signals.
FM modulation is more efficient in terms of Transmitter power output, because the transmitted signal is constant and can be set to the maximum rated power of the transmitter's amplification circuits.

