The only difference between Type I and Type II CompactFlash cards is the form factor: Type I cards are 3.3mm thick while Type II cards are 5mm thick.
Type I and Type II devices have exactly the same electrical interfaces, so you can use a Type I CF in a Type II CF slot, but not vice versa. CF memory cards used to be all Type I but when the larger capacity cards came onto the market, they needed to move to Type II to fit the extra chips. When memory technology improves, they may revert back to Type I? Dunno. All Microdrives are Type II.
(Incidentally the two thicknesses directly correspond to the thicknesses of Type I and Type II PC Card slots, allowing you to use a Type I CF device (with adapter) in a Type I PC Card slot, etc.)