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So in my basement I have insulation that was put up by the builder. My first question is what is this type of insulation called?

Insulation

The second question I have pertains to finishing the basement. I plan on framing the whole basement and assume that I need a vapor barrier (live in the Maryland area) and insulation behind my walls. The insulation is already on the walls, but doesn't go all the way to the floor in all spots (maybe 3-4" short in some spots). Can I leave the insulation on the walls as is, or am I going to need to rip it all off to put up a proper vapor barrier and do better insulating?

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If you are fully framing with the wall anchored top and bottom, you can leave the existing and further insulate between studs before applying a vapor barrier. You could place strips of foam board to fill the gaps for good measure. –  bcworkz Oct 9 '13 at 21:22
    
If I do that, wouldn't it cause an issue with the space between the foamboard and the foundation walls, particularly in the existing insulation? –  2 Left Thumbs Oct 10 '13 at 14:55
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What sort of issue? I was just thinking you could fill the 3-4" gap below with foamboard. Not a big deal one way or the other since the framed wall is fully insulated. A fully framed wall could cause the plumbing rough-ins to be mis-located. You might need to strip the insulation and use furring strips just in the bathroom. –  bcworkz Oct 10 '13 at 22:39
    
Does this type of insulation "count" as a vapor barrier? Yah, the distance from the wall for the rough in is tight as it is, so like you said I'd probably have to cut insulation and furring strips, though not sure if that's going to cause a problem for running the plumbing or not. –  2 Left Thumbs Oct 11 '13 at 3:35
    
What's there serves as a barrier. Foam board is impervious to moisture so is a barrier, but is incidental to what's going into the wall. What that is will dictate if a barrier is required. The existing insulation doesn't count as it is on the wrong side of the added insulation. Hopefully you can get the plumbing over to an interior wall, otherwise you may need some pilaster "features" to hide the plumbing. –  bcworkz Oct 11 '13 at 20:01
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