Lately I've been seeing a lot of messages along the lines of "cool font" or "what font is that?" and though it's great that there is interest and appreciation for the work that is out there, I think it's important that the correct terminology is used for each case. This confusion has been cleared up before in a vastly more eloquent way by some seriously talented folks but as it's something that I have recently run into, I think I should at least give a shot at an explanation.
Simplified, lettering is basically drawing letters in a specific composition and/or style to suit a specific purpose. Every time I draw a word, chances are that if you were to rearrange those letters in any other order than that which is intended, it would not look too great. That is because those letters do not exist to be utilized in any other context, unlike typefaces. When a type designer designs a typeface, they have to make sure that all the letters that they are creating can be rearranged over and over in countless ways and still look great together. A letterer is usually given a word or phrase to illustrate; because each word has set letters in a set order, there are ways to draw it that are unique to that word.
I hope that this helped explain the difference some!