Severity means seriousness of the Bug..Priority means which
one should rectify first..
  I too don't know exact diff. between Bug and Defect.
One more RajKumar..Don't club two different questions as one
b'cos some one know one answer and some one may know the
answer for the other..So Post as two different questions..

I tester finds any thing than its called bug.
If coustomer finds Than its deffect

severity means How badly it is affecting on function.
Priority means How important it is to fix that bug.


Defect means anything which is missing, extra and wrong.
Bug means error.

Severity - Impact of bug in the application. 
Priority - Effect of bug in the application.

Bug = when a tester gets any difference in application from 
its requirement then it is called as bug.
Defect = when the customer finds any difference from 
requirement or if the application doesn't work properly 
then it is called defect

Severity - Impact of defect on the product.Severity types 
is given by testers.
Priority - Depends on Business logic.Proority is given by 
business people or product manager in the company.
   A defect may have high Severity but low priority coz it 
may not be involved in business logic.

Bug-Conformed defect is called bug.it is said to be bug 
only at developer place.
Defect-Any functionality is wrong then it is said to be 
defect by testers.It turns to bug only at developers place.

severity-the seriousness of the defect with respect to 
functionality
priority- thre importance of the defect with respect to
customersite

bug-developer should accepect the defect 
defect- difference between the actual values to expected 
values

what is diffence between bug and defect?
Error : Is an undesirable deviation from requirements 

Bug : Is an error found BEFORE the application goes into 
production 

Defect :Is an error found AFTER the application goes into 
production

Severity:Means how severe the bug is and to what extent its 
affecting the application
Priority:When we want the developer to fix the bug
E.g:if P1 is the priority given to a bug then the developer 
should fix the bug at the earliest
------------------------------------------------------------
Bug:Found by tested before the application goes into 
production
Defect:Found by customer after the application goes into 
production
------------------------------------------------------------

severity is nothing but  impact of the bug on the 
application

priority is nothing but importance to resolve the bug from 
customer point of view

Severity : It Means how depth it is effecting the 
application.
Priority : How fast it should be resolved to avoid the 
defect.

severity:the seriousness of defect in terms of functionality
priority:the importance of defect in terms of customers


defect:a mistake in coding is called error.this is error 
found by during testing by test engineer called defect

bug:reported defect accepted by the developers is called bug
or issue issue means bug in us terminology.

severity : the importance of defect wrt testcase is severity
priority : the importance of defect wrt customer is priority

Defect: due to errors if any mismatches occur in program is 
called defect
Bug: if that defect approved by developer then it is called 
bug.

Difference between severity and priority
Priority - It is something related to the scheduling. i.e., 
the urgency of the issue and the time period on which it 
should be fixed and delivered.Priority is majorly depends 
on customers expectation. 
Severity - The nature of the bug or issue.It is exactly the 
problem level in the product. 

Difference between bug and defect

The term bug and defect almost similar. Ultimately it 
refers to the problem in the code. 
But in the real time , we call a bug as something 
identified by the tester (i.e, before delivering a product) 
and defect is identified by the customers(i.e., once the 
product is delivered)

As per my knowledge both Defect and Bug are same.
Naming convetions are different for diifferent clients or 
different organizations.