Teabag tea is made with very small pieces of tea - called "Fannings & Dust." Because of their miniscule size, the tea pieces in a commercial teabag release all of their tannins and flavor at once. This can result in a bitter brew if allowed to steep for more than a minute or two. Conversely, Loose-Leaf Tea is made from either large pieces or whole-leaf teas. These allow the tannins and flavors to be released slowly, and in a controlled manner.
You can only get one cup (or pot) of tea from teabags, but you can get up to four cups (or pots) from an equal amount of loose tea. Loose tea is also more environmentally friendly - you don't have the box, the box liner, the paper or foil wrappers, the bag, string, staple & tag to dispose of. When you're finished brewing a pot of loose-leaf tea, you can take the spent leaves and dump them on your garden, yard, flower or herb pots, or compost heap. They bio-degrade and help to replenish the soil. Of course, if you don't have a garden, yard or flower pots, you can dump them down the drain, or dispose of them in the trash, where they will also bio-degrade.
And finally, when you factor in the fact that you're not paying for expensive packaging (it actually costs more than the tea!), and that you can get multiple cups or pots out of loose tea, it turns out that most Loose-Leaf teas are actually cheaper per serving than teabag teas!