Difference between "ability" and "capability"

Capability implies unrealised potential, as in "John is capable of winning", which implies John has the ability to win but it's not definite. It means more or less "John has the talent that's needed to win."

Ability, on the other hand, implies possibility. "John is able to win" means John is in the running to win but not necessarily that he has the skills or ability to win. It means more or less "It's possible that John will win".

But here's where it gets more confusing:

"John is able to read" means John can read without doubt, whereas "John is capable of reading" means John has all the necessary brain power and whatnot to be able to read but the question of whether or not he can read at the moment is left unsaid (although the fact that someone does say "John is capable of reading" probably means John can't read right now).

If we would like to describe the functionality of a specific product like a software, I think it is more common to use 'capabilities' (vs 'abilities'): "MS Word has these capabilities: edit tables, copy and past, styles etc."