There are three types of User-Defined functions in SQL Server and they are

1. Scalar,
2. Inline Table-Valued and
3. Multi-statement Table-valued

Scalar User-Defined FunctionA Scalar user-defined function returns one of the scalar data types. Text, ntext, image and timestamp data types are not supported. These are the type of user-defined functions that most developers are used to in other programming languages. You pass in 0 to many parameters and you get a return value.

Inline Table-Value User-Defined FunctionAn Inline Table-Value user-defined function returns a table data type and is an exceptional alternative to a view as the user-defined function can pass parameters into a T-SQL select command and in essence provide us with a parameterized, non-updateable view of the underlying tables.

Multi-statement Table-Value User-Defined FunctionA Multi-Statement Table-Value user-defined function returns a table and is also an exceptional alternative to a view as the function can support multiple T-SQL statements to build the final result where the view is limited to a single SELECT statement. Also, the ability to pass parameters into a T-SQL select command or a group of them gives us the capability to in essence create a parameterized, non-updateable view of the data in the underlying tables. Within the create function command you must define the table structure that is being returned. After creating this type of user-defined function, It can be used in the FROM clause of a T-SQL command unlike the behavior found when using a stored procedure which can also return record sets.