"Search Engine Optimization" targets free listings while "Search Engine Marketing" is paid placement

Most search engines provide two types of results listings in response to the same user query: organic (also called "natural" or "free") listings, and paid listings (i.e., advertisements). These two types of listings are kept separate, and ads are noted by the phrase "Sponsored Links" or "Sponsored Results" appearing above them. Although both organic and paid results appear in response to the same search, the results are independent of each other. This allows for an advertiser to perform well in the paid listings, even if their site isn't ranked in the top organic search results.

Organic (or FREE) Search Results

It is the organic listings (in blue above) that search engine optimization seeks after through a process of site development and link building. SEO's goal is to get ranked in the free search engines results for keyword search terms related to your site or business to gain larger volumes of free and highly-targeted traffic. ( More on Search Engine Optimization )

Paid (or Sponsored) Search Ads

The “Sponsored” sections on Google, Yahoo and Bing search engines (in orange above) are paid advertisements. Placing these ads are referred to as search engine markerting, or more accurately pay-per-click advertising. PPC advertising is where a company chooses what keywords they want their ads to appear for and bid on the amount they are willing to pay each time a person clicks through the ad to their site. Advertisers can pay anywhere from $0.10 to $5 a click depending on the competition of the keyword and the quality of the ad you are placing. While many amatuers try their hand at manging their own PPC campaigns, their is an extensive knowledge base required to produce effective results. Daily evaluation, testing and research are required to continually improve ad quality, keyword performance, and both click-through and conversion rates. ( More on Search Engine Marketing )

LOCAL SEARCH LISTINGS

Local search results are deifined by results that are nearby the person searching or if the searcher includes a geographic term such as city name. Typical local search listings, like Google Maps/Places (in green above) include not only information about "what" the site visitor is searching for, but also "where" information, such as city and street address. Over 90% of consumers now go online to research local products and services. New mobile technologies are pushing that number even higher every day. With dozens of data sites geared toward local search it only takes a few seconds for potential customers to find all the businesses that meet their needs — location, phone, customer reviews, and more. ( More on Local SEO )