In most cases, an HRV, or heat recovery ventilator, is required in a home to meet building code standards.  They improve the efficiency of the house as well as provide needed fresh air to buildings.  Essentially they allow the air that is leaving the house to be ducted close to the incoming air inside a heat exchanger.  This allows for the heat from the exhausted air to be passed to the incoming air so that your furnace won't have to work as hard to heat the incoming air in the winter.


Below is an infographic that shows how an HRV works and how it can be connected to a forced air system.  In the case where you do not have a forced air system, the fully ducted option is the only one that is possible: