It helps to remember that with balloon framing you "blow up" the walls all the way to the roof. Floors are hung off the balloon frame.
In platform framing (now "standard" framing) you built a platform all the way to the outside of the walls at each floor.
Balloon framing was invented first and many old buildings went up and put the roof on before building the floors.
When all the trees were straight grain old growth there were lots of great long studs (not anymore).
After lots of deadly fires it was realized that the wall cavities made great chimneys so fire blocking was required every 8'.
Platform framing is now standard since studs are shorter and for most crews it is easier to build the platforms as you go up. Wall sections are normally framed on the platform and then tilted up into position.
Balloon framing is still used in places where the strength of the tall studs help stabilize short walls as in the 20' wide 1 1/2 story cottage.http://www.jshow.com/y2k/listings/50.html
PS - Most codes require that a habitable room have a minimun headroom of 7'-6". If the ceiling is a beam and decking situation, and beams are 3' or more apart, then the beams can be as low as door headers - 6'-8" and the ceiling counted to the bottom side of the decking.