For normal text they are all compatible. There are some special sequences of characters, usually an ESC followed by some numbers or letters which are used for things like cursor positioning, turning underlining on and off, and graphic effects which are not directly printable but have an effect on the display. These are different between terminal models simply because their manufacturers made their own standards, they all date back to a time when those were common display terminals. Hyperterminal has the ability to intercept some of those character sequences and duplicate the effect they would have in a Window. The emulation you select determines which sequences it should recognize and act upon.
For example, the VT100 was a display terminal made by DEC (Digital Equipment Corporation) back in the late 1970s, if you use VT100 emulation, you make Hyperterminal behave like the VT100 did.
Brian.