Difference B/W lookup and master detail relationship

The key difference is master-detail has a direct dependency between the objects:

• You cannot have a detail record without a master.
• The detail record inherits sharing rules from the master.
• You cannot update the relationship to the master in a master-detail relationship.
• The number of master-detail relationships you can use are limited.
• You cannot set profile object permissions for a detail record
• Master-detail relationships are automatically included in report record types 

When you delete the master it will cascade delete all detail records relating to that master. A typical use of a Master-Detail would be the classic Sales Order and Sales Order Items objects. 

• Lookups are generally for use where you may or may need to have a relationship between two objects (but not always).
• Lookups are generally used to reference commonly shared data, such as reference data.
• Lookups are used to link two objects together when you don't want the behaviour of the master-detail - particularly around sharing rules, profile permissions and cascade delete.
• Lookups are used when you need to relate multiple 'parents' to the detail record.

You can change between a master-detail and a lookup after you create the field. My recommendation is always start with a Lookup relationship and then if you decide you need the features of a master-detail change it. If the detail object has it's own tab then you probably want to use a lookup not a master-detail.