Adam Bertram differentiates the two:
Whenever you execute or run anything in PowerShell, you’re running a “command.” A command is an informal term for executable code, which can be a built-in PowerShell cmdlet, a custom function, or even an object method.
Cmdlets are compiled executable code provided by Microsoft, created in a language like C#, compiled, and added to a PowerShell module by software developers. Functions, on the other hand, are created directly in PowerShell by users. Although functions and cmdlets are technically different, they can be thought of as similar when you’re starting out.
Read on for more information, including a demo. I normally call them all cmdlets, but apparently I’ve been doing it wrong all this time.