Explain Public Funding vs. No Public Funding RE: U.S. Presidential Campaign

Everytime I read something about Obama’s fundraising vs. McCain’s fundraising I try real hard to understand the public funding vs. no public funding issue, but I can’t get my head around it.

Public funding of a Presidential Campaign is optional?
If the candidate chooses public funding he is limited as to what additional funds are allowable?
Are there limits placed on how public funds can be used that may make it preferable to forgo accepting public funding in the first place?

Rather than discussing abstracts could I get an explanation that directly addresses Obama’s fundraising compared to McCain’s? Pros and cons of public funding?

This is in GQ because I mostly want to understand the facts of the situation. However, I would also be interested in hearing some commentary from informed individuals. If we can keep the commentary objective, perhaps we can stay out of GD territory- I hope, really looking for facts here, but facts put into perspective with a bit of commentary.

I’ve tried to understand this with my own research, but I really just don’t understand it.
ETA: If this OP doesn’t make any sense, just take that as further evidence of my lack of understanding.

This is on the fly, so I’m sure I’ll miss on some details, but I’ll give it a shot.

Public funding was designed to give minor candidates a more level playing field with regard to fund-raising, by providing matching funds, and also to limit the size of contributions a candidate could accept from a donor.

In exchange for federal matching funds, candidates are limited to how much they can spend in their quest for the nomination, and then the general election.

Because of this, there’s effectively a limit to what a campaign can spend.

This was done pre-Internet. However, in 2004 Howard Dean developed an Internet-based fundraising model that made it extremely easy for thousands of donors to donate relatiovely small amounts ($20, $100, etc.) The ease of donating brought in many, many small donors, which added up to big numbers.

Obama expanded the small-donor concept, to the point where he is now rolling in dough. As such, he didn’t need federal funding. Because he doesn’t accept federal funding, he’s not bound by the limits that come with the funding.

By contrast, McCain (who has played a part in campaign finance legislation that brought about matching funding as it exists today) has committed to accepting federal matching funding, and the limits that go with it.

That’s the really, really simple version.