Both cars drive all four wheels so in one sense there is no difference except that AWD has become an accepted description for a car that drives all of the wheels, all of the time. 4WD is generally accepted as a car or more typically a larger SUV (Sports Utility Vehicle) that uses a driver selectable system that mechanically engages the drive to all four wheels
4WD is normally used on large SUV Four-Wheel Drive (4x4) vehicles designed to use the extra traction of 4WD in off road situations. These vehicles are predominately truck based platforms with large wheels and off road tyres that combined with a manually selected and a locked 4WD driveline enables the vehicle to venture off-road and negotiate very difficult terrain.
A locked 4WD driveline means that there is direct mechanical link between front and rear axles with no mechanism to allow any difference in the number rotations of the front and rear axles. This means that when the 4x4 vehicle turns a corner because the radius of turn is different for front and rear axles, the tyres on the axle with the smaller radius of turn must be able to slip on a loose slippery ground surface. If the ground surface is not slippery and the tyres do not slip, then the driveline (axles and propeller shaft etc) will twist and stress will be induced. This is known as ‘wind up’ and ultimately if the twist cannot dissipate the vehicle will no longer be able to move as it becomes ‘locked up’. This will generally only happen at lower speeds on ground surfaces with no slip. At higher speeds or on slippery road surfaces, the tyre is able to slip and the ‘wind up’ is released. This means that when 4WD vehicles are driven on normal road surfaces, 4x4 must be deselected and the vehicle driven in two wheel drive.
As stated in the first paragraph, an AWD vehicle drives all of the wheels all of the time, so the system must include a mechanism that is generally a limited slip differential or an electronically controlled clutch to allow a rotational difference between front and rear axles.
Crossover small or medium SUV All-Wheel Drive cars such as Subaru Forester that are designed for normal road use with occasional dirt or mild off road use generally use permanently engaged AWD systems. This has the active safety advantage of always having twice the grip of a driver selectable 4WD system. This means that in the unexpected situation where the corner is more slippery than expected or when immediate traction is required to move safely into merging traffic, All-Wheel Drive is already engaged and the required level of traction is available to safely negotiate the situation.
The best SUV, therefore, from an active safety point of view is an AWD vehicle that does not require driver selection to drive all four wheels. This is because twice the level of traction is always available to get out of that difficult situation when a split second can make the difference between life and death.
However, to be a true All-Wheel Drive vehicle the system must be one that does not require any driver intervention to select drive to all four wheels. Any system that normally runs in 2WD and only engages Four-Wheel drive when loss of traction occurs or requires driver selection is not a true AWD system because it is not driving all of the wheels, all of the time. With these systems, by the time 4X4 is engaged, traction is lost and a potentially dangerous situation has occurred.
Related articles: All-Wheel Drive (AWD) vs. Rear-Wheel Drive (RWD)