keeping it simple...
Previously "davidemarsh01" has described the difference very nicely. But for those who don't understand the technical terms clearly, let's make the explaining simple. For instance, if you draw a picture on a rubber balloon and then inflate it, the picture would distort. That's what happens to a picture when you use digital zoom. It doesn't actually zoom in, it just stretches the picture and thus makes it blurry. On the other hand, optical zoom is more like the fact that you were actually getting closer to the object. This is done by using optical lenses and doesn't make the image blurry or distorted.
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