A wireless access point (AP) connects a group of wireless stations to an adjacent wired LAN. Conceptually, an AP is like an Ethernet hub, but instead of relaying LAN frames only to other 802.3 stations, an AP relays 802.11 frames to all other 802.11 or 802.3 stations in the same subnet.
A wireless router connects a group of wireless stations to an adjacent wired Network. Conceptually, a wireless router is a wireless AP combined with an Ethernet router. A wireless router forwards IP packets between your wireless subnet and any other subnet.
Typically, wireless routers are used in residential and small hotspot WLANs where all users can be supported by one combined AP/router. Wireless APs are used in business and larger hotspot WLANs where many APs are required to provide service -- for example, to cover a bigger area or to support hundreds of users. In larger WLANs, it usually makes sense to have several APs feeding into a single, separate router. Wireless stations can then be treated as one large subnet, which is helpful when roaming from one AP to another. Wireless access controls can also be "concentrated" at one router instead of spread across several independent routers.
Not to confuse you, but there's one more detail I should mention. Most wireless routers are actually low-end firewalls that use Network Address Translation to share one Internet address across several wireless stations. Most wireless routers also include a 4-port Ethernet switch so that you can connect a few wired PCs to your LAN and let them share Internet access too. So, it's really more accurate to say that most "wireless router" products combine the functionality of a wireless AP, an Ethernet router, a basic firewall, and a small Ethernet switch.
This was first published in February 2004