What is TRANSLATION:
Translation - This applies to fairly literal, "word for word." This is often out of necessity. If you want to make sure that a person in China understands how to use a product (such as a medical device) manufactured in USA, it is important that the source and target-language text match up precisely. This effort often just impacts more literal content such as documentation, legal, manuals, etc. So, your functional areas here might be technical publications, compliance, HR, support, etc., and is typically billed per word.
What is LOCALIZATION:
Localization refers to the adaptation of a product, application or document content to meet the language, cultural and other requirements of a specific target market (a locale).”
This is a more involved process whereby the target-language content is adapted to more effectively convey a similar meaning or connotation in the target culture. Idiomatic expressions, puns and marketing material generally fall into this category, but localization can apply to any type of content based on what your business objectives are. The key point here is that your target-language version will often not be a literal translation. As an example, if you want to convey the phrase "Like father, like son" in Chinese, it would read as something like "Tigers do not breed dogs." Although this doesn't match up with the source content, it has the same connotation in the target culture.
Localization affects more the content that is driving customer action. Web sites, marketing campaigns, branded content would all fall into this category and the majority of this would fall under advertising, marketing and business development. It can be billed per word or hourly or as a flat fee per project. Often thought of only as a synonym for translation of the user interface and documentation, localization is often a substantially more complex issue. Localization may even necessitate a comprehensive rethinking of logic, visual design, or presentation if the way of doing business (eg., accounting) or the accepted paradigm for learning (eg., focus on individual vs. group) in a given locale differs substantially from the originating culture.
Localization is sometimes written as l10n, where 10 is the number of letters between l and n. i18n allows applications to support and satisfy the needs of multiple locales, thus “enabling” l10n. It is because of i18n that we are able to localize all of the Mozilla project within its pantheon of applications and open the web up to the world!