A On-line UPS the output is always isolated from the input at all times. It is always running off the batteries even when the input voltage is good. This way the load is completely isolated form the input and any possible problems that the line could incur.
With a Line Interactive UPS it monitors the input lines and only runs off the batteries when needed. Under normal operation it is not in the circuit.
Liebert has some white papers on this as well check out this link ->
The choice should be governed by how fast a response you need in the event of an outage.
Either one would be a good choice for normal power operated equipment. However in critical situations where no more than a quarter cycle is acceptable on line is your only choice.
line-interactive [UPS] is actually Start-on-demand-UPS.
In this Schema Critical-Load runs on Mains-Supply & the UPS remains in Stan-by or On-Demand power. The main problems in it are:
1.
No regulation & No-Filtering of spikes & noise unless you have connected an AVR & a Power-Conditioner connected in Power-In or Power-Out side. This is a serious-threat for SENSITIVE-Electronics.
2.
As the UPS takes over after the Brown-out or Black-out, it may have following problems for the system:
a.
Interruption of power to Moving parts like Motors. As such-UPSs are not synchronised to the Mains-power the moving parts may have an electrical-jerk.
b.
As for as Electronics is concerned it may or may not be effected if the DC Supplies of Electronics have large back-up capacitors, .. but
.. if any circuit depends on a signal-pulse from AC supply it may go out of Rhythm & damage may occur.
3. On-line UPS:
It is actually a "double conversion UPS" the load is always on UPS' which ensures a clean & Regulated Power.
More-over remains Synchronised to Mains-Supply & shifts to Mains in case of any fault in UPS, so a smooth Change-over to Mains is ensured.
If you have a Back-up Generator Set & like to Transfer the load to it, load will transfer as soon as the out-put of UPS is synchronised to Generator-Set.
It is compulsary as Synch is required in this operation, if UPS fails afterwards, there will be no unpleasant condition for transferring of load to Generator
OR
to Mains if Mains comes-back within "Back-up Time" of Battery-Bank of UPS.
This is a sophisticated system & out-put of UPs remains synchronised to Input Power Source [Mains or Generator-Set].