I also have both a cold mist vaporizer and a steam vaporizer, and I prefer the steam variety.
There are pluses and minuses to each type. There is an obvious risk of burns with the steam vaporizer, but not so much as you would think. Their designs have been greatly improved since the one I used as a child. The outside body of my vaporizer doesn't get hot at all, and the steam escape is designed to keep steam from rolling out in a way that can burn easily. The only real burn issue is if it gets tipped over, and as Cindy pointed out, it's not that hard to make it safe.
A cool mist vaporizer works by making water vapor through a rapidly turning disk within the water of the humidifier. There's not the risk of burn, but the cool water can be an excellent breeding ground for mold and bacteria. Therefore, it is very important to follow the manufacturer's instructions concerning cleaning which usually includes cleansing the tank on a daily basis with soap and water. Cold mist vaporizers can also disperse the minerals with the water, which can cause health problems, so that's why you have to use distilled water with them. Because of all this, and the fact that the cool mist vaporizer was much noiser and less calming than the steam vaporizer, I prefer to use the steam one.
As far as how it works, I've really appreciated having mine. We, too, have had a spate of colds lately, and the vaporizer offered the only real relief I could give my daughter for several days.