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First, let's define parallel processing. Parallel processing is a computing approach to increasing the rate at which a set of data is processed by processing different parts of the data at the same time.

Distributed parallel processing is using parallel processing on multiple machines. One example of this is how some online communities (Folding@HOME, the Mersenne Prime search, etc.) allow users to sign up and dedicate their own computers to processing some data set given to them by the server. When thousands of users sign up for this, a lot of data can be processed in a very short amount of time.

Another type of parallel computing which is (sometimes) called "distributed" is the idea of a cluster parallel computer. A cluster would be many CPUs hooked up via high-speed ethernet connections to a central hub (server) which gives each of them some work to do. This cluster method is similar to the method described in the above paragraph, except that all the CPUs are directly connected to the server, and their only purpose is to perform the calculations given to them.

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