Hi. The first difference is the reservation.

Usually for most colleges the reservation for All India Quota (through all India Counselling), the seats reserved are 15% of the total seats. This means that if there are 100 seats, 15% of them will be reserved for candidates from all over the Country. Naturally, since there are a lot of candidates in consideration, the competition is more in this category.

Then comes the state quota, which constitutes 85% of the total seats. Only the candidates who have the domicile of a state can apply for all the seats. Lets say I am a domicile candidate of Himachal Pradesh, so I have the right to all the seats of my category in the 85% state quota. This includes all government as well as private seats. But if I were to apply to another state's counselling (not via AIQ) say Punjab (where i am a non-domicile candidate), I am only eligible to the management seats. The competition is also less as compared to AIQ.

Because of the difference in competition, the cut off for AIQ is usually higher than that of state quota.

I hope this clears your doubt,