Gouraud Shading is effective for shading surfaces which reflect light diffusely. Specular reflections can be modelled using Gouraud Shading, but the shape of the specluar highlight produced is dependent on the relative positions of the underlying polygons. The advantage of Gouraud shading is that it is computationally the less expensive of the two model, only requring the evaluation of the intensity equation at the polygon vertices, and then bilinear interpolation of these values for each pixels.
Phong Shading produces highlights which are much less dependent on the underlying polygons. However, more calculation are required, involving the interpolation of the surface normal and the evaluation of the intensity function for each pixel.