Today there was some slight confusion on the difference between Hi-Z inputs and Line Level inputs on the home recording forum. The difference is not a huge deal, but I'd like to go ahead and clarify exactly what this is in a not-so-technical sort of way (sort of).
Line Level refers to the type of signal that mixers, audio interfaces, etc use to pass audio signals back and forth. Microphones do not output line level signals so we use a preamp to boost this signal up to standard line level so we can manipulate the audio as we wish.
Hi-Z stands for high impedance. Without getting overly technical, every electronics thingy has an input and output impedance. The ratio between the output impedance and the input impedance has a dramatic effect on the amount of level sent. A real world example of this is with microphones. All microphones have an output impedance of some kind. Of course, the microphone is plugged into a preamp which has an input impedance. The lower the output impedance of the microphone and the higher the input impedance of the preamp, the more signal is passed into the preamp.
For the most part, this really isn't all that important for recording music. It may come up here or there, but most of the electronics mumbo jumbo has been taken care of for you so you can focus on music. However, there is something you should be aware of. The lower the output impedance and the higher the input impedance, the more aggressive in the mids and highs the signal is going to tend to be. This is due to inductive and capacitive reactance. You certainly don't need to understand capacitive reactance to be a killer recording dude/chick, but if you are interested you can look into this more.
Inductive and capacitive reactance is the reason that long guitar cables suck tone. The longer the cable, the greater the apparent output impedance of the guitar, the lower the ratio between input and output impedance, and therefore the duller the signal tends to be..
Real World Application
For people recording direct guitars (I've got that sick feeling in my stomach like I've just watched a “Feed the Children” commercial), line level is not ideal. This is because of the relatively high output impedance of electric guitars. They just don't mate well with plugging straight into preamps. Guitar amps and pedals generally have much greater input impedances than mixers and preamps do. So, Hi-Z inputs started showing up on audio interfaces, preamps, etc. The idea is to give the guitar a load that it's used to seeing (and therefore make it sound the way you are used to hearing it).
Of course, I hate just about everything about direct guitars, so take that for what it's worth. If your direct guitars are coming out muffled (as opposed to the usual mega mega mega fizz you hear on many Myspace guitar tones), you may look into getting an audio interface or preamp with a Hi-Z input. Of course, I still think you would be better (when possible) to use a real amp and a microphones.
Impedance, Microphones, and Preamps
Different mics sometimes have very different output impedances. Different preamps have very different input impedances. Because of that, a SM 57 plugged into preamp A vs preamp B may sound quite a bit different. But a condenser microphone may sound pretty much the same when plugged into preamp A or preamp B. This is because of the different input and output impedances.
Some high end preamps will have selectors so that you can change the input impedance. This can often make quite a difference in the tone.