Standby:Your machine recovers quickly as your data is stored in RAM. The slower part is waking up the peripherals. Although your machine is in "standby" the power has been cut to items such as your hard drive and monitor. You're running your machine in a very low power mode, but it is still on. This mode can be useful if you're on a notebook and need to conserve your battery while you step away.
Hibernate:
The big difference is that your PC has shut down and is not pulling power. Another difference is that your data is saved to your hard disk and not RAM. This makes it a safer, but slower option for shut down and resume.
Note:
Not all PCs have the capability and are configured to Hibernate. If yours is, to see the Hibernate option on your XP shutdown screen, hold down the Shift key when you shut down.
Some comments up on hibernate and standby:
comment 1:
I've always loved hibernate. It's great for when you are running out of power and don't want to lose what you're working on.
Still, I used hibernate for a while on my home machine, but my wife hated it because it took to long so I switched it to standby. It's much faster, but I constantly get these annoying errors about data lost on $DMFT or something like that.
comment 2:I prefer Hibernate for my desktop, as it allows me to pick up right from where I left off. Slow as a it may be, it is not nearly as slow as a clean boot.
comment 3:
It uses about as much hard disk space as you have RAM. Thus, if you have 1 GB of RAM, you can expect hibernating to take about 1 GB of hard disk space. This will be cleared up when you bring the system back up. Whether this is an "enormous chunk of your hard drive" depends on your particular system and your definition of "enormous".
My choice is depending up on your hardware configuration and your flexibility you use hibernate or standby