A microprocessor is an integrated circuit that serves as the central processing unit of a computer, containing all the arithmetic and logic operations. It has a flexible structure and higher clock speeds but requires more external components. A microcontroller is an embedded system optimized for a specific task with memory, processor and I/O integrated on a single chip. It has lower clock speeds and memory but lower power consumption. Microprocessors are used for general-purpose computing while microcontrollers are used for embedded applications with predefined tasks like appliances and sensors.