I get this question alot so I think I should just clarify it for my audience. There is some confusion as to what a widget and a plugin is and the difference of both of them. WordPress has many 3rd party developers who create widgets and plugins for download. Most, if not all, are free of use for anyone using the WordPress platform. Most of the widgets and plugins are compatible with the newest version of WordPress. You can flawlessly upgrade the plugins inside the WordPress Admin panel. There are thousands of plugins and widgets available but what is the difference and what should you be looking for?
A WordPress plugin allows a Blogger to add a function to his or her blog by downloading a software script. Some of the popular plugins allow for better SEO, Adsense placement, sharing of posts, contact form generator and much more. There are literally thousands of plugins you can download for free that will make your blog more powerful. Some plugins are visible to the viewer of your blog while others are for the back-end where only you can see they are present.
A WordPress widget is an object you can add to your sidebar usually derived from a plugin. Under “Appearance” is the “Widgets” section, you can simply drag and drop objects into your sidebar. When you upload Worpdress onto your server you will have some widgets that are already available such as a search box and category section. A widget is very important for your blog because the sidebar is where the action is other than your content. A well organized sidebar is essential for reader interaction, advertising placement and an area for your readers to explore other content on your blog.
The short answer: A widget is a plugin that you can drag and drop in your sidebar. A plugin is a script that you download that improves the function of your blog in your front-end or back-end.