You use type I if you want a slightly muddier, hissier sound - you also have to boost the high-end, I tend to use these for recording sessions and to experiment with deliberate tape damage and saturation. With type II and type IV, they have slightly more clarity and balance, to my ears anyway, and these are better for actual copies of a release. If you want to record onto cassette for warmth, but don't want the hiss, type II could work as well. Type IV is made of metal particles, really expensive and really only for master copies.
For the record, I have only dubbed actual copies of releases onto type I tapes for financial reasons. If funds permitted, all editions would always be type II.
