Help! Can some explain the difference between these two types of data to me?
DEM is a raster or with digital value of the elevation at the given pixel. it is continuous data.
LIDAR is laser remotely sensed data, is it laser returns, which are points with known x, y, z values, and other information.
LIDAR data can be used to create DEMs.
Which is best for using the Hydrology tools in spatial analyst?
I also want to be able to the slope function to calculate the slope the banks of rivers of streams.
To use hydrology tools and slope function you have to use raster dataset.
The resolution depends on your application and the required accuracy for your project.
For instance if you are mapping the streams at a country or continent scale, 30 m or 50 m DEM can do the job. but for mapping streams in a reservation park for example I will use 1 to 3 m.
Depending on the data source the DEM will be different.
If the source is surveyed the DEM will most likely represent the ground itself
If the source was radar (InSAR) the DEM is most likely represent the surface with the buildings and streets
Look at DSM (digital surface model) and DTM (digital terrain model)
LIDAR data can be used to derive DSM and bare ground DEM.
If you have LIDAR data I recommend using it to create DSM and bare earth DEM, then use these rasters in the hydrology tools.