Your website is hosted on a webserver that creates log files, these accurately store any kind of visitor movement on your site. This ?Big Data?, is difficult to read, complicated to transport to a central server, and impossible to digest in raw format. Logaholic can be setup using log files as main data source to report valuable visitor behavior in a understandable format. It then imports (this process is called ?Parsing?) visitor data into a local database that accurately stores traffic history on the visitors to a Web Site.
Which method is best for you is hard to determine without knowing your situation. Both methods have their merrits, despite the fact both methods will show significant different traffic numbers there is not a good or bad method, actually they compliment eachother.