David S. asks:
What is the difference between SEO and SEM?

The short answer:
SEO (search engine optimization) impacts the organic/natural listings on the search engine results page (SERP)
SEM (search engine marketing/paid search/PPC) impacts the sponsored listing areas on the SERP

Below is a picture showing those two areas marked off:

Detailed differences between SEO & SEM:

SEO is a process of adjusting both on-site and off-site elements that are known to impact the search engine’s ranking algorithms. The ranking algorithms give the search engines the ability to evaluate websites for their relevancy to a user search query. Now, there are some 200 – 300 different factors that make up the ranking algoirthms and no one individual knows them all. However, experienced SEO professionals will have a solid understand of the key ranking factors and what will positively impact them.

Also, with SEO, you will commonly hear people say that SEO is free. Well, its not. When a search engine user clicks on your listing in the organic/natural results that click does not directly cost you money but with SEO all of you costs will be associated with the work it took to achieve that position in the listings and the cost it will take to maintain that position. SEO is a continual process of trying to improve or maintain your positions as the search engines will commonly change their ranking algorithms (in 2009 Google pushed over 540 search quality improvements which is ~1.5/day).

SEM, which people often interchange with the PPC (pay-per-click) acronym or often referred to as Paid Search, is the method of utilizing a search engine advertising program to get ads for your website included in the SERP for keyphrases in the Sponsored Link/Listings area. These ads are specifically controlled by you (or an account manager) to say exactly what you want.

The difference here with SEM vs. SEO is that when your ads are clicked in SEM you are paying per click. So, each time your ad appears there is a dollar value you have placed on that ad you are willing to pay if a qualified search engine user clicks it. This cost varies greatly depending on the competition in your niche, your ad, the keywords you are bidding on and your website (to name a few). With SEM, the amount of traffic you can drive to your website site is directly proportional to the budget you have allocated to pay for clicks.

In conclusion, SEO & SEM are vastly different and when I am talking to businesses about search engine marketing as a whole I suggest a combined approach. There are benefits to both. They also compliment one another by filling-in gaps in your search engine marketing strategy that the other does not cover.

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