Furnaces are fueled typically by natural gas, and provide warm air in the winter. Furnace heating ability is measured with an Annual Fuel Utilization Efficiency (AFUE) percentage. Remember, a higher AFUE percentage indicates a more efficient furnace (See Efficiency Ratings Explained).
As mentioned above, a gas furnace uses natural gas, although some models can be converted to utilize propane. An electricity source is required to run the control systems, blower and some accessories.
A metal heat exchanger is heated, and cool air from your home is forced through the heat exchanger. Modern furnaces have variable speed fan motors for quiet operation. A condensing furnace is more efficient, but requires different venting than older furnaces did.