SEM is short for Search Engine Marketing and refers to online paid advertising, such as Pay-Per-Click (PPC) or Cost-Per-Click (CPC) or CPM (Cost-Per-(thousand)Impressions). PPC/CPC/CPM is widely provided by major search engines, social bookmarking sites, online directories, etc., such as Google Adwords, Yahoo Search Marketing, Facebook, YellowPages.com, etc… PPC listings can be seen in “Sponsored Links” zones on websites…
SEO is short for Search Engine Optimization and refers mostly to promoting a website/listing in search organic (no PPC) and local listings found in google maps, yahoo local, bing maps, etc…
SEO also involves optimization of a website content and meta and title tags and link building, while SEM does not require such tasks to be performed.