As far as I know ( i do not claim to be an expert), a fluid head uses the flow of viscous fluid to smoothly control the rate of panning. As you turn (or tilt) the head, fluid is forced through an opening. The wider the opening (which is often adjustable) the less resistance on the movement.
With a friction head, resistance is determined by two washers (i think nylon usually) that can be compressed tighter together to create more (or less) resistance. The use of solid friction makes the resistance much less smooth than a fluid head. This is why most serious video tripods use fluid heads. Friction heads are more commonly used in photography.
Personally I think if you are serious about video, you should't skimp on the tripod. It's something that is extremely important for quality camera movements, and even more important, they last a lot longer than a camera body.