What's the difference between pipes and sockets?

what are the differences between pipes and sockets, and when/how should you choose one over the other?

Both pipes and sockets handle byte streams, but they do it in different ways...

• pipes only exist within a specific host, and they refer to buffering between virtual files, or connecting the output / input of processes within that host. There are no concepts of packets within pipes.
• sockets packetize communication using IPv4 or IPv6; that communication can extend beyond localhost. Note that different endpoints of a socket can share the same IP address; however, they must listen on different TCP / UDP ports to do so.

Usage:

• Use pipes:
  • when you want to read / write data as a file within a specific server. If you're using C, you read() and write() to a pipe.
  • when you want to connect the output of one process to the input of another process... see popen()
• Use sockets to send data between different IPv4 / IPv6 endpoints. Very often, this happens between different hosts, but sockets could be used within the same host

BTW, you can use netcat or socat to join a socket to a pipe.

To complete the answer given by Mike, it is important to mention the existence of UNIX domain sockets, which are available on any POSIX compliant operating system. Although very similar to "normal" internet sockets in terms of usage semantics, they are purely local to the machine (of course internet sockets can also work locally), and thus almost behave like a pipe. Almost, because a UNIX pipe is by definition unidirectional:

Pipes and FIFOs (also known as named pipes) provide a unidirectional interprocess communication channel. A pipe has a read end and a write end. Data written to the write end of a pipe can be read from the read end of the pipe. (excerpt from the man page pipe(7))

UNIX domain sockets also have a very unusual feature, as besides data, they also allow sending file descriptors: this way, an unprivileged process can access any file whose descriptor has been sent over the socket. This technique, according to Wikipedia, is used by the ClamAV antivirus scanning daemon.