Originally Posted by mervinking
Tethering lets you connect a computer or pad device to your phone, which then acts a modem. This lets one computer or device use your internet connection.
Like: Your on the road and need to use your laptop to do something on the internet, tether your phone to it and use it as a modem.
WiFi HotSpot lets your phone become a mini Internet Cafe and computers or WiFi enabled devices can then use your phone as a router which then connects to the internet. This lets multiple computers/devices use your internet connection at the same time.
Like: You camping with some friends but do have a good cell signal. They all decide they would rather play Farm-ville than make Smores, so you turn on your HotSpot and they fire up their laptops and it becomes an uneventful camping trip.