To add to Silvio's reply, model by ip or hostname tells Spectrum to choose the correct model type to manage the device being modeled. If the device has been certified, either out of the box or self-certified, then Spectrum will model the device correctly.
If you model by type, unless you know for certain the model type selected is the correct model type to manage the device, you take the chance of using the wrong model type to manage the device. You would not want to model a Cisco Router using the Juniper Router model type.
Joe