What exactly are the differences between Chrome users and browser profiles?

Solution 1:

System users vs local settings profiles

A User Profile is system specific, stored in its User folder through that %LOCALAPPDATA%. Meaning that if you log on into Windows with two different users you cannot access eachother's user profile folder without prior linking or other form of permission access and setup.

C:\Users\Adam\
C:\Users\Eve\

Eve can't load Adam's cookies or saved passwords, nor vice-versa.

Basically it ties those User Profile folders in Adam and Eve to the local security layer and permissions defined for each user in questions, including Admins.

The Browser profiles in-browser User is in case you have need for a different set of settings for a site or just want a fresh profile without extensions to test or browse in case some extensions make trouble.

For example: you don't want to create a new system User for your sister just so she can go on Facebook and have to switch between accounts through the shut down button or task manager, you'll use your own user, so if you both want to log onto Facebook, each with your own account, at the same time, you have to create a new browser profile in-browser User. In the Default profile in-browser User you are logged in with yours and you have your own settings, cookies, passwords and in the second profile in-browser User your sister will get her own privileges without interference, both of them can run simultaneously, switching between them is simpler and faster. All extensions need to be installed again in the second profile if need be.

Fixed meaning, typically Google should have used the 'profile' and 'user' words accordingly, a user is a private account, similar to the local user account, and a profile a second separation entity which is working within the same local user account. Mozilla named them accordingly: profiles, Google named them Users they should have named them in-browser Users if they wanted to stick with the word.