Difference between "can" and "may"

Which is correct if I want to request for a pen?

• Can I have your pen please?
• May I have your pen please?

Can primarily expresses possibility and ability and, secondarily, permission. May expresses primarily possibility and, secondarily, permision and volition. In seeking permission, as in your examples, the use of may is much more formal and polite than can and is used rather less.

However, both 'Can I have your pen please?' and 'May I have your pen please?' are blunt ways of making a request. In practice, a native speaker, at least of British English, is much more likely to say something like 'You don't happen to have a pen I could borrow, do you?'

NOAD has a usage note that reads:

Is there any difference between can and may when used to request or express permission, as in : may I ask you a few questions? or : can I ask you a few questions? It is still widely held that using can for permission is somehow incorrect and that it should be reserved for expressions denoting capability, as in : can you swim? Although the use of the 'permission' sense of can is not regarded as incorrect in standard English, there is a clear difference in formality between the two verbs: may is, generally speaking, a more polite way of asking for something and is the better choice in more formal contexts.

I suspect many other English dictionaries have similar notes under their entries for may or can.