An eBook reader is a smaller device with an eink screen where a tablet is typicaly a bit larger and has an LCD screen.
Ok, but how does that make much of a difference?
The screens make a huge difference! An eink screen is a slow refreshing black and white screen that is very gentle on the eyes for extended reading where an LCD screen is great for movies, pictures, web pages and colors while causing some eye strain after some usage. Additionaly, an eink screen is not backlit is it is visible clearly even under intense sunlight (although some ebook readers come with a light to light up the screen for night use).
Nice, but which one do I get?
Well, that depends. Do you want to check your email and watch videos while doing light reading or do you want to use the device as a replacement for your book collection? The choice is up to you. However, eBook readers are typical cheaper as a middle of the run reader is about $100 while a middle of the road tablet is about $250. Some tablets like the Apple iPad 2 can easily cost more than $500