Here's an explanation I had found on the MTH website back in 2015.
Hi-Rail Wheels - are designed for operation on any type of 3-rail AC track system M.T.H. Premier Line 3-rail locomotives are equipped with hi-rail wheels that feature deeper flanges, blind center drivers, wider wheels, and traction tires. These locomotives are identified with a "-1" item number extension (ie: 20-xxxx-1). Three-rail engines with Proto-Scale 3-2 are designed for operation on any type of 3-rail AC track system, and can quickly be converted for use on 2-rail DC layouts. The deeper flanges on locomotives with hi-rail wheels, however, may contact the track ties on low profile 2-rail track systems. Engines with hi-rail wheels are also equipped with truck-mounted Proto-Couplers that mate with any standard 3-rail equipment.
Scale Wheels - are aimed at 2-rail DC operators
Two-rail Proto-Scale 3-2 locomotives feature narrower scale-width wheels with more-prototypical low flanges. These locomotives are identified with a "-2" item number extension (ie: 20-xxxx-2). There are no blind (non-flanged) wheels or traction tires on locomotives with scale wheels. These engines can be converted for use on 3-rail track by installing the center rail pickup rollers that are included with each engine. Because flanges are present on all wheels and are low in height, operation on some 3-rail track systems and switches may be compromised resulting in frequent derailments. This is especially true on tracks that have rounded rail surfaces instead of a flat top rail surface. Scale wheel locomotives should only be used on track systems that have a flat top rail surface. The use of flanges on all wheels will increase the minimum curve requirement of scale-wheeled locomotives, and some uneven operation may be noticeable when traversing 3-rail switches. Engines with scale wheels are also equipped with body-mounted scale couplers that will not mate with standard 3-rail couplers. See the M.T.H. website for specific minimum curve requirements for each Scale Wheeled-equipped locomotive.
Proto-Scale 3-2™
Many Premier steam and diesel engines are equipped with Proto-Scale 3-2, a unique M.T.H. feature that allows you to run the same engine on 2-rail or 3-rail track, under AC or DC power. Engines cataloged with hi-rail wheels are intended primarily for 3-rail operators, while engines with scale wheels are aimed at 2-rail DC operators as well as 3-rail AC operators looking for more scale realism. Scale-Wheeled versions of diesels have more-realistic fixed pilots, while Hi-Rail versions have swinging pilots to negotiate smaller-radius curves.
The conversion wheel kits listed in most of our latest catalogs offer additional versatility. Each kit contains enough wheel sets for (2) power trucks. Scale wheels are polished, turned metal with scale treads and flange height, and are mounted on metal axles with one insulated side for use on 2-rail O Scale track systems. Two wheel sets in each kit contain a pre-mounted drive gear.
Charlie