DOT3 brake fluid is the "conventional" brake fluid used in most vehicles.
DOT3 fluid is inexpensive, and available at most gas stations, department stores, and any auto parts store.
DOT3 fluid eats paint!
DOT3 fluid absorbs water very readily. (This is often referred to as being hydroscopic.) As such, once a container of DOT3 has been opened, it should not be stored for periods much longer than a week before use. Since DOT3 fluid absorbs water, any moisture absorbed by the fluid can encourage corrosion in the brake lines and cylinders. DOT4
DOT4 brake fluid is the brake fluid suggested for use in some late model cars.
DOT4 fluid is available at most auto parts stores, and at some (but not all) gas stations or department stores.
DOT4 fluid does not absorb water as readily as DOT3 fluid.
DOT4 fluid has a higher boiling point than DOT3 fluid, making it more suitable for high performance applications where the brake systems are expected to get hot.
DOT4 fluid eats paint! Small leaks around the master cylinder will eventually dissolve away the paint on your bodywork in the general vicinity of the leak, and then give rust a chance to attack the body of your car!
DOT4 fluid is generally about 50% more expensive than DOT3 fluid.
Since DOT4 fluid still absorbs some water, any moisture absorbed by the fluid can encourage corrosion in the brake lines and cylinders. DOT5
DOT5 brake fluid is also known as "silicone" brake fluid.
DOT5 doesn't eat paint.
DOT5 does not absorb water and may be useful where water absorption is a problem.
DOT5 is compatible with all rubber formulations. (See more on this under disadvantages, below.)
DOT5 does NOT mix with DOT3, DOT4 or DOT5.1. Most reported problems with DOT5 are probably due to some degree of mixing with other fluid types. The best way to convert to DOT5 is to totally rebuild the hydraulic system.
Reports of DOT5 causing premature failure of rubber brake parts were more common with early DOT5 formulations. This is thought to be due to improper addition of swelling agents and has been fixed in recent formulations.
Since DOT5 does not absorb water, any moisture in the hydraulic system will "puddle" in one place. This can cause localized corrosion in the hydraulics.
Careful bleeding is required to get all of the air out of the system. Small bubbles can form in the fluid that will form large bubbles over time. It may be necessary to do a series of bleeds.
DOT5 is slightly compressible (giving a very slightly soft pedal), and has a lower boiling point than DOT4.
DOT5 is about twice as expensive as DOT4 fluid. It is also difficult to find, generally only available at selected auto parts stores. DOT5.1
DOT5.1 is a relatively new brake fluid that is causing no end of confusion amongst mechanics. The DOT could avoid a lot of confusion by giving this new fluid a different designation. The 5.1 designation could lead one to believe that it's a modification of silicone-based DOT 5 brake fluid. Calling it 4.1 or 6 might have been more appropriate since it's a glycol-based fluid like the DOT 3 and 4 types, not silicone-based like DOT 5 fluid.
As far as the basic behavior of 5.1 fluids, they are much like "high performance" DOT4 fluids, rather than traditional DOT5 brake fluids.
DOT5.1 provides superior performance over the other brake fluids discussed here. It has a higher boiling point, either dry or wet, than DOT 3 or 4. In fact, its dry boiling point (about 275 degrees C) is almost as high as racing fluid (about 300 degrees C) and 5.1's wet boiling point (about 175 to 200 degrees C) is naturally much higher than racing's (about 145 C).
DOT5.1 is said to be compatible with all rubber formulations.
DOT5.1 fluids (and Spectro's Supreme DOT4) are non-silicone fluids and will absorb water.
DOT5.1 fluids, like DOT3 & DOT4 will eat paint.
DOT 5.1 fluids are difficult to find for sale, typically at very few auto parts stores, mostly limited to "speed shops."
DOT 5.1 will be more expensive than DOT3 or DOT4, and more difficult to find.