In Physique, envelopes follow the Physique deformation spline that runs through the joints in the skeleton's hierarchy. A deformable (as opposed to rigid) envelope is one that moves the mesh vertices it encloses as the skeleton moves.
A link can have both a deformable and a rigid envelope. When it has both, the effect of the two is averaged, creating a less flexible skin.
In character animation, you typically use deformable envelopes; however, some portions of the body, such as the head, might look best if they are rigid. See Deformable and Rigid Envelopes.