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Well, a HTML banner is a piece of HTML/JavaScript/Ajax while a Flash banner is made with an multimedia authoring software.
Basically there is no difference in functionality, although the Flash banners are more "platform compatible", especially refering to older webbrowsers or exotic operating systems (e.g. there is an up-to-date Flash player available for most operating system environments, but webbrowsers savvy in complex JavaScript/Ajax are just available for the popular systems - and they still have some issues to solve).
So if you have the choice, go with a Flash banner.
Regarding Photoshop, I don't use this and cannot say much. But I would wonder (and definitively had a look at this software) if it would be able to handle HTML.
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