My degree is in Marketing, so I’ll give you the classical definitions, which I still use today when approaching a client’s project.
Marketing involves the "4 P’s" - Product, Price, Place and Promotion. A marketing plan looks at everything from the appropriateness of the Product for its market (target markets, competition, quality of the product, production values, etc.), how it is Priced in the market (low cost leader, price leader, value play, etc.), where it will be sold (Place) which for books is mostly about what types of distribution and outlets will be used, and finally Promotion - which people usually think of as "marketing" but you can now see, it is only one piece of marketing.
In big companies the marketing department sets the strategies and direction for the product or product line, then other parts of the company implement those strategies - sales, PR, communications, etc. As small presses, we do it all, but that doesn’t make it any less important to think about how all of these pieces function together.
There is nothing more disappointing to get a client who says "I’ve done all this ‘marketing’ for my book and spent all this money on advertising (part of promotion) and my book isn’t selling - what’s wrong?" Then I find out that the only place it can be purchased is on iUniverse’s (or some other POD publisher) website or just as bad, their just launched website. They have totally gotten the cart before the horse. You must have distribution before spending money or time on promotion. I’ve had similar horror stories with pricing problems and product problems. It ALL has to work together - product, price, place and promotion.
Back to promotion for a moment - promotion is made up of two major components in the book industry (well, any industry actually) - push and pull marketing - and again, you need to do both. Push marketing is "trade" marketing - getting your potential distribution partners interested in carrying your book - this can be trade reviews, ads in PW, attending BEA, etc. - these are book trade outlets. Pull marketing is what you do once you have your distribution set up - this is internet, broadcast, print and live presentations - things that are targeted towards your potential audience - getting them to go purchase your book. Remember - 7 impressions to make a sale - this is where pull marketing comes in (you pull the sales through the channels). In my opinion, you shouldn’t just focus on internet marketing - it is necessary to be wherever your potential readers are - and getting the word out via print media (newspapers and magazines), broadcast media (TV and radio) and doing live appearances are all valuable pieces of your plan and need to all be pulled into a coordinated effort.
A third type of marketing is what Seth Godin calls building your tribe - this is really the old institutional or branding marketing - building a name for yourself and your products. That should start well before the book is out - even up to a year isn’t too soon.
To drill down a little further on promotions, you have paid promotion which is called advertising - you get to tell your story however you want - you paid for it. The other type of promotion is publicity (whether via print, broadcast, or internet) and this is what most of us focus on (most small publishers can’t really afford much advertising). With publicity, you don’t get to advertise your product - the publicity outlet is telling a story of some type (news or entertainment) and you hope to be a part of it - these stories are much more powerful than advertising when you get featured as an expert or as an example in the story.
Hopefully that explains the difference between marketing and promotion.