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Bluetooth is a short-range wireless protocol. While it can be used to establish connections between devices, it is most commonly used as a method to connect to peripherals like keyboards, printers, headsets, and cell phone modems. It is also a useful way to exchange files wirelessly without setting up a network.
Wifi is for joining a wireless network at the office, at home (if you have a wireless router or computer card), or at the many wifi hotspots that are around. This will give you full network access and is the way to give your device access to network resources like shared drives and internet.
Bluetooth can be used with bluetooth headsets to talk with others wirelessly, without having to hold the phone up next to your ear.
It can also be used to wirelessly connect to your pc.
Some phones/programs will work with bluetooth headphones and allow you to listen to music without wires.
With the arrival of ActiveSync 4.0, Microsoft dropped AS support for wireless syncing via wifi, but it is still supported with bluetooth. I'm not sure what the status is under Vista, which uses Windows Mobile Device Center instead of ActiveSync.
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