There are two main categories of creatable Web controls. 
User controls are more simple to create, but custom 
controls are more simple to use. The extra effort that goes 
into creating custom controls pays off for the developer 
using the control at design time.

User controls are saved with an ASCX file extension. 
Although they can be easily reused on any of the pages 
within the project in which they were created, there is no 
good way to reuse them in a different project. Another 
downside to user controls is that they only appear on the 
page at run time; at design time they appear on the page as 
an ugly gray box, making it difficult to envision how 
they'll appear to your users.

Custom controls can do everything that user controls can 
do - and much more. The biggest drawback is that they are 
more challenging and complex to create. Drag and drop is 
not supported for the creation of these controls. 
Therefore, all the HTML they output must be generated via 
code. Pretty much all the articles & controls on this web 
site are examples of custom controls. In addition to run-
time functionality without limits, custom controls support 
rich design-time functionality. They can appear on a page 
at design time the same way they'll appear at run time, or 
differently if preferred. They can be adjusted to change 
how they'll appear in the toolbox, and how the properties 
will appear in the properties window. If the properties 
window doesn't support the desired functionality, it can be 
extended with custom popup dialog boxes and other UI 
tricks. Custom controls are easily distributed and can be 
enhanced with help documentation and licensing 
functionality, allowing them to be sold to other developers.

1.server controls are dll's and placed in toolbox,
1.user controls are pages and it have an extexsion .ascx.
It does not placed in toolbox.
2.User controls are more simple to create
2. but custom controls are more simple to use.

The main difference is that a seperate copy is generated of 
user controls whereas only single copy of custom control is 
shared.

user controls executed on each user separately and at client
side only, where as custom controls executed on server side
and only one copy for any number of users