Daemon runs without a UI at all and can only be used with emacsclient. server-mode is used with a normal/non-daemon instance so emacsclients can connect to it.

Daemon runs without a UI at all and can only be used with emacsclient. server-mode is used with a normal/non-daemon instance so emacsclients can connect to it. Combined with the --alternative option you can then run emacsclient without really thinking about it. The first one will start a full emacs instance and enable the server, subsequent ones will just connect to that server.