Disabled User Account

How does a Disabled account differ from a regular user account?
Is historical data (postings) still visible on the Wall?
When users request an account to be deleted, could we archive the account instead of deleting it - for purposes of legal requirements?

A disabled account changes their Joomla user block state to blocked. They however can reverse it themselves if you've used CB Privacy to allow them to disable themselves. As for content yes most of their content will no longer be visible and their profile will also not be accessible. This allows them to basically soft-delete their account.

As for user delete all of their content should be deleted if you've the necessary parameter enabled in plugins that store user content. Generally this is just a "Auto Delete" parameter within a plugins Parameters > General tab. Most plugins have this enabled by default.