Both are code reduce features and reusability Purpose.When 
we create Masterpage that is common to overall 
project,whereas user controls these r used when we have 
requirement on specific criteria.
Master page ex: INBOX,SPAM,DRAFT,TRASH etc in YAHOO WEBSITE

Master pages and user controils are two different concepts.

Master pages are used to provide the consistent layout  and 
common behaviour for multiple pages in your 
applications.then u can add the Contenetplaceholder to add 
child pages  custom contenet.
 User Controls:Sometimes u need the functionality in ur web 
pages which is not possible using the Built-In Web server 
controls then user can create his own controls called user 
controls using asp.net builtin controls.User controlsn are 
those with .aspx extensions and u can share it in the 
application.

Master has a conteact plceholder where u can put child page 
in  this cph.

when user control is uses with in page . u can not use any 
page in user  control

i think you can aslo page apply used with master page...
but control is only providing the add control not page...

I Think Both are same but key difference is that , we can
not use mater page in user control................

master pages can not be cached.
user controls can be cached .

Some times Javascript function may not work in master pages.
but in User controls, v can do server side code as well as 
java script code.

just a not : 
this can be a tricky question depending on the interviewer.
Masterpage IS a UserControl, and you can easily check this
either by exploring classes to which websites are being
compiled or simply noting : 
public class MasterPage : UserControl

semanticaly, use of classical UserControl and Masterpage is
of course different, but this already has been elaborated in
other answers

user control
       1)it extension is .ascx.
       2)it can be more than one on single web page.
       3)it doesn't contain Contentplaceholder.
       4)it doesn't work like a fixed template.it can be
display in diffrent manner in diffrent page. 
MasterPage:
       1) it extension is .Master.
       2)it used like a template.
       3)it contain ContentPlaceHolder.

Master page inherits all child pages in contentplace holder 
and usercontrol can be placed in master page

user control is a control which must be placed in a page to 
perform specific task

I think we can implemented bussiness logic in user contorl 
but its vise versa we can't impelemented bussiness logic in 
master page..

I look for the answer of this question too. I have project
in ASP.NET 1.1 in this project there is just one aspx. in
this page there is placeHolder and by client's reuqest page
loads different user controls into the placeHolder. the aspx
file likes MasterPage. now i converted the project into
ASP.NET 3.0. I don't know should i change the aspx file to
master and user controls to content pages or not??

master page is used when you want consistant look.
whereas user control is used to create your own control 
using asp.net built-in control.

In dotnet 1.1, developers where using user controls for the 
website navigation, footers which were standard for all the 
web pages, this was covered in 2.0 as master pages.