Hi,
There are multiple funds encashing the Gold wave. One set of funds (national and international) are based on the companies that are into gold mining and typically is FoF. Do remember that these funds' performance is directly linked to the balance sheets of these mining companies and hence, is no different from any of other funds.
ETFs are MFs but listed on an exchange. They track the daily variation of gold price and typically one Unit signifies the value of 1 gm of 24 carat gold at any point of time. ETFs exhibit both long term variations (over a month or so) as well as intra-day.
E-Gold by NSEL is another feature that is newly opened. In this case, you buy gold from a commodities exchange (Spot Exchange) and store it in a dematerialized form (demat). As per my understanding, when you wish to liquidate, you get physical gold for the units being sold. Currently delivery is limited to Ahmedabad, Mumbai & Delhi and if you are living elsewhere, do look up the options. You can read more at
http://www.moneycontrol.com/news/commodities/e-gold-the-new-name-for-gold-_451084.html. I am not sure of additional charges if they are levied for physical form of gold being delivered.
My 2c: Go in ETF for it provides a easy interface to interact and provides ample liquidity and can work as a good hedge from a cash point of view i.e. if you wish to have gold as an investment hedge and don't wish to go in for any ornaments, then ETFs are ideal for you.
If you wish to go in for ornaments, do look up buying physical gold from Mints in your state or from banks whenever there is a dip in gold prices. However, it is difficult to spot a dip in last 3 years
Happy Investing !!