What They Have in Common
As each type emphasizes different elements, knowing the basic characteristics of mountain bike wheels is helpful for discerning what is most important to you. In contrast to road bikes, 26-inch and 29-inch mountain bike wheels (also referred to as ISO 559 and ISO 662, respectively, for the diameters of their rims, as measured in millimeters) both have knotty treads for traction, and the surface area of their wider wheels also increases traction. They also require a lower air pressure, which increases the wheel's traction as well as shock absorption. Their sturdiness allows them to hold up over rough terrain.
Traction and Control
The 29-inch wheel has a greater surface area than that of the 26-inch wheel, which increases traction. Its greater wheel size can also ride at an even lower air pressure, which further increases surface area and traction. This makes for an even smoother ride over rough terrain. Because of this grip, it can maintain a more confident line. In this way, the 26-inch wheel can be more vulnerable to the impact of obstacles. However, the smaller wheel compensates with greater responsiveness to the rider's steering--making it a more agile ride. Finally, those who are not very tall may find the 29-inch wheel a less comfortable ride, as its size lends to a bigger frame.
Speed and Shock Absorption
The added volume of the 29-inch wheel adds considerable rotating weight, making the 26-inch wheel easier to accelerate. However, the 29-inch wheel can be easier to maintain at a constant speed because it is smoother and because its wider rim gains greater distance per revolution. Also, the lower air pressure of the bigger tire absorbs more shock, thus requiring less bike suspension, which can steal forward momentum.