Digital starts as analog and is converted to digital before sending to the goggles/RX. The process of converting to digital increases latency but allows for a clearer image quality. If there is significant signal drop out, video can be completely lost until signal is regained while video quality remains clear when you have signal.
Analog does not get converted to digital but still gets processed before being sent to the goggles/RX. Better latency than digital. More prone to interference. When there is interference, it will be seen in the goggles as static, discoloration, blurring, etc., but you will still have video in most situations. Analog is relatively lighter and cheaper. Most whoop/quad racers use analog because of the low weight and low latency.
As Litterbug shows, analog can provide very good quality vid.