This feature allows you to create a backup where only those files will be included which have been changed since the last full backup. The difference between this feature and the other two (incremental respectively full backup) is that this is somehow a hybrid between the two. One disadvantage of the Incremental backup is when restoring the files : you need all the intermediary incremental copies to fully restore the system. With differential backup this number is usually lower and may vary from 1 to as many as in the case of the incremental backup.
As for the backup the Incremental backup mode is faster than the differential backup which is faster than the full backup. As far as it concerns restoring the complexity is inversely proportional.
On the other hand this backup type is harder to restore because you have to restore not only the differential set but also the last full backup set, in their creation order. If you have the Restore Wizard then restoring an differential backup set is almost as easy as drinking a glass of water.