Option #3: Create a mobile site that’s separate from your original desktop site at a different URL
Similar to option #2, the server detects the mobile visitors and redirects them to a mobile-optimized site (often using a sub domain like m.yoursitename.com). Setup is easy and cost effective. This can give you freedom to create a specific mobile site designed for just mobile users, and any changes to the mobile site can be made independantly from the desktop version.
The Gotcha: Like option #2, you have to keep two different sets of code and content. You will also have a different URL altogether for your mobile site, so you have to be careful in redirecting the URLs from desktop to mobile. The Googlebot might not understand the relationship between the desktop and mobile pages and will index them separately meaning that the search results might get skewed a bit. Also like #2, you have to keep your content updated separately on the mobile website.
Who should do this?
Since setup is relatively easy and cost effective, this is good for small business with very basic site needs in the interim until they get onto a responsive website. This approach is also good for businesses that have to manage their mobile sites independantly (i.e. they want to hire a different vendor for mobile).