Exception and Errors are two subclasses of Throwable Class.

Exception:-Exception can be devided into two other groups.

Checked Exceptions and Unchecked Exceptions.

Checked Exceptions are the User defined exceptions and it 
must be caught by the user.(Eg:IOException etc.)

Unchecked Exceptions are the subclasses of Runtime 
Exception.(Eg:FileNotFound Exception,Division by Zero etc.)

Errors:-Errors are the external interrupts that terminates 
the execution of the program.That means Errors ate out of 
user control.It can't be catched by the user.(Eg: 
OutOfMemory Exception etc.)

The exception class defines mild error conditions that your 
program encounters.
Ex: Arithmetic Exception,FileNotFound Exception

Exception can occur when 
  --> Try to open the file,which does not exist
  --> the network connection is disrupted.
  --> operands being manipulated are out of prescribed 
ranges.
  --> the class file you are interested in loading is 
missing.
     The error class defines serious error conditions that 
you should not attempt to recover from .in most cases it is 
advisable to let the program terminate when such an error 
is encountered.
 Ex. Running out of memory error,stack overflow error.