Solana supports several different types of wallets that can be used to interface directly with the Solana command-line tools.
To use a Command Line Wallet, you must first install the Solana CLI tools
A file system wallet, aka an FS wallet, is a directory in your computer's file system. Each file in the directory holds a keypair.
A file system wallet is the most convenient and least secure form of wallet. It is convenient because the keypair is stored in a simple file. You can generate as many keys as you would like and trivially back them up by copying the files. It is insecure because the keypair files are unencrypted. If you are the only user of your computer and you are confident it is free of malware, an FS wallet is a fine solution for small amounts of cryptocurrency. If, however, your computer contains malware and is connected to the Internet, that malware may upload your keys and use them to take your tokens. Likewise, because the keypairs are stored on your computer as files, a skilled hacker with physical access to your computer may be able to access it. Using an encrypted hard drive, such as FileVault on MacOS, minimizes that risk.
A paper wallet is a collection of seed phrases written on paper. A seed phrase is some number of words (typically 12 or 24) that can be used to regenerate a keypair on demand.
In terms of convenience versus security, a paper wallet sits at the opposite side of the spectrum from an FS wallet. It is terribly inconvenient to use, but offers excellent security. That high security is further amplified when paper wallets are used in conjunction with offline signing.
A hardware wallet is a small handheld device that stores keypairs and provides some interface for signing transactions.
A hardware wallet, such as the Ledger hardware wallet, offers a great blend of security and convenience for cryptocurrencies. It effectively automates the process of offline signing while retaining nearly all the convenience of a file system wallet.