Applets must have GUI where as Applications mayn,t have GUI.
Applet starts execution after init() method where as 
Applications start execution after main() method.

The major difference is that an application is a standalone 
concept and can use the local system resources whereas an 
applet is used over a network or it can be embedded in a 
java enabled web browser or html page and it cannot have 
the access to local system resources....

The differences between an applet and an application are as 
follows:

1. Applets can be embedded in HTML pages and downloaded 
over the Internet whereas
Applications have no special support in HTML for embedding 
or downloading.

2. Applets can only be executed inside a java compatible 
container, such as a browser
or appletviewer whereas Applications are executed at 
command line by java.exe or jview.exe.

3. Applets execute under strict security limitations that 
disallow certain operations
(sandbox model security) whereas Applications have no 
inherent security restrictions.

4. Applets don’t have the main() method as in applications. 
Instead they operate on an
entirely different mechanism where they are initialized by 
init(),started by start(),stopped
by stop() or destroyed by destroy().

A Java Applet is made up of at least one public class that has to be subclasses from java.awt.Applet. Whereas, A Java application is made up of a main() method declared as public static void that accepts a string array argument,along with any other classes that main() calls.

Application-It is a standalone programme which is executing 
in a single machine or in several machine through a network.

Applet:-
1-It is the small aplication.
2-Generally applets are used for internet application.
3-It used to make web sites.
4-It can be downloaded in internet by java compatiable web 
browser just like an vidio , audio files.
5-It is more secure ,you can download it with out any fear 
of viros attacks.Because java is more secure.