Systems generating electricity from energy in the rays of the sun are called photovoltaic (PV for short) or solar power. They are sometimes confused with solar thermal systems because they resemble and are often mounted on roofs of houses, sometimes even integrated together in what appears to be a single array.
A PV creates electricity that can be used by the electrical loads in the house. PV systems flow through the photovoltaic effect. When the sun strikes the silicon PV cell, electrons are excited and want to get moving. The wiring of the PV generator corrals these electrons and marches on the inverter, the combined current is converted into alternating current and sent to the devices in your home or back to the grid. PV modules are flat, glass encapsulated panels often a shiny blue or black appearance. Typical PV systems combine 10 to 50 of these modules in an array.
A solar thermal system uses energy from the sun to use water to heat a house or pool, or for heating the House itself
Solar thermal collectors are very similar PV modules -. they are both flat panels approximately 3 ‘to 5’ in size. Solar thermal collectors are not the shiny appearance of the PV modules, which is a way to keep them apart. Another telltale sign is the presence of plumbing, instead of wiring (which you usually can not see from the ground anyway), that of the panels.
A solar thermal system is a closed system, where a fluid such as glycol is circulated through the collector on the roof. If so, is the sun on the collector and the heating of the liquid flowing through it. The heated fluid then travels to the home of the boiler and carries its heat energy to the water in the boiler. This is, in principle, the heating of the water for free, instead of paying for gas or electricity to heat the water. (Instead of the device, the heated liquid can be used in a similar way to heat the swimming pool.)
Both thermal and PV are excellent means of exploiting some of the free energy of the sun, and both are qualify for generous discounts.
Source: http://ezinearticles.com/?Solar-Thermal-Vs-Solar-Electric—What-is-the-Difference?&id=4317259 by Mona Reese