In 1913 when the Buffalo Nickel made it debut, it originally displayed a Buffalo on the reverse standing on a raised mound. The mound, being at the bottom of the coin was the obvious place to put the inscription “Five Cents”. This was a beautiful design, but there was one major flaw. Because the mound was raised, the word Five Cents wore off of the coin very quickly. So quickly in fact that they had to change it the exact same year that the coin was release.
That is where the Type 2 comes in… on the Type 2 Buffalo Nickel, the mound was recessed and made basically into a flat plane. Then they were able to put the inscription “Five Cents” on the recessed area, protecting it from wear. Because of the time it took them to fix the coin dies, there ended up being more of the Type 1 produced than the Type 2 in 1913 (although not by a large margin). There were roughly 38.5 million Type 1 1913 Buffalo Nickels vs roughly 35.2 million of the Type 2 1913 Buffalo Nickels. Regardless of the mintage numbers, both types from 1913 carry a pretty decent premium, especially in higher grades.
One thing that they did not change on the Buffalo Nickel but probably should have is where the date was located. The date of the Buffalo nickel was on a raised plane on the front of the coin, and as a result, it did wear off quite quickly. In fact, there are a very large number of “Dateless” Buffalo Nickels out there today, and people have even come up with ways to reveal the original date on “Dateless” buffalo nickels by using a chemical process that reveals the pressure difference on the metal when the coin was originally pressed.