As you know Search engine optimization purely based in organic way or in simple terms in a free manner .SEO(Search Engine Optimization) is a part of SEM.SEM stands for Search engine Marketing ,it can be explained as acquiring traffic from search engines and other websites by means of payment. Like Google adwords, Yahoo marketing, MSN adCenter.
We know that SEO is a long term process ,so generally website owner wont wait for that long time they will pay for their website traffic driven by search engines and other websites.
Paid inclusions in search engines and directories
Pay per click advertising
Traditional advertising i.e placing ads in search engines
For example if you need 1000 visitors per day you can pay an amount for each visitor and buy them from the popular means like google adwords, MSN adcenter, yahoo sponsor, Miva and many of other search engines .This is traffic driven from search engine advertising whereas another famous one contextual advertising is you can place your website ads on other websites which can drive you traffic .
Advantages:
People needs to switch over the paid marketing because it produces a definite and quick result ,
You can test your product reach and performance in daily basis
If your product is worthy you can convert it in to money
You can target your visitors to the perfect landing pages of your website which can express more about your product
SEO may lead a general traffic but paid traffic leads category related traffic
For example
If you have a music related website which sells CD/DVD or products
SEO may generate traffic even for free mp3 musics but you can sell your product to a viewer who is expecting something free where as in SEM you can generate the perfect traffic for your product.
Disadvantages:
If you cant convince your visitor both your time and money gets failed.
It can make you profitable suddenly at the same time it drives to a great loss.
SEM cannot be fulfilled without SEO ,well trained SEO can perform SEM better.
I have just explained you the basic and differences between SEO and sem .There is lot do with SEM we will discus in coming days .Hope you can understand the difference.