ROOT means you have full control over the OS. From the OS, you can write to the recovery partition. Without root, the only way to write recovery is through hboot, which will only let you flash a custom recovery if you have S-OFF. But even with S-ON, you can write recovery from the OS if you have root. Then, with a custom recovery, you can write the hboot with an engineering bootloader, which has S-OFF. This way, you get S-OFF without a warranty-voiding watermark.
S-OFF means you can flash a custom recovery or ROM from hboot. Things you could already do with root, except that it's hard to get root while S-ON. But if you get it, you're set.
HTC says they'll ship an update which sets S-OFF, and then we're set, except their update will almost assuredly drop a watermark and void the warranty.
ANALOGY: Say the phone is a fortress, and you're trying to get in. S-ON means the gate is shut. If you root it with S-ON, you do it with an exploit, so you find a weak spot in the wall and pack it full of C4 and BOOM, you're in. S-OFF means they opened the gate from the inside, and you just walked in. Either way (S-OFF or root) you're in.
SUMMARY: With S-OFF, you get everything. With root, you get everything. End of story.
Final comment: rooting with S-ON means you used an exploit. Exploits are bad!! But HTC is forcing us to resort to such brutish, nasty means (blowing up walls to the fortress) because they locked the gate before selling us the place. We have a right to get inside, but they aren't opening the gate, so we have to get in some other way. Remember, if you can blow up the wall and walk in, a malicious program can do so too. Exploits are bad, and HTC should patch them. But let's get some legitimate use out of them first, ehhh?