What are difference between Default instance and Named instance in SQL Server?


A SQL Server installation is referred to as an instance. Up to and including SQL Server 7.0, only one installation of SQL Server was possible on a server, but that restriction didn’t suit a number of deployment scenarios that customers required, including high-availability and consolidation.

With the release of SQL Server 2000, multiple installations of SQL Server were possible on a single server and were known as SQL Server instances. SQL Server 2008 continues with this model and with very few changes.
A default instance has much the same profile that SQL Server installations have had in past; you install SQL Server and then connect using the computer name of the server. Your Windows Server can only have one computer name, so you can only use it to connect to one SQL Server instance. This is called the default instance.

If you install additional instances of SQL Server, these are referred to as named instances. You connect to them using the <computername><instancename> format. For example, if you have a server named PLUTO and you install a named instance named SQL1, you would connect to that instance using PLUTOSQL1. If you installed another named instance called SQL2, you would connect using PLUTO SQL2. If you had a default instance installed, you would connect using PLUTO.

Each instance is completely independent of any other instance and has its own set of services, databases, and configuration settings. All the components of a single instance are managed together, and service packs and patches are applied to all components within an instance.

During the installation process you have to specify a unique instance ID, which is used to define the directory structure, registry structure, and service names for that instance. This is new in SQL Server 2008. By default, the instance name that you specified is used as the instance ID. For the default instance, MSSQLSERVER is used as the instance ID.

for more info

http://windows-scripting.org/2010/10/18/instances-versu-default-instance-in-sql-server-2008/ 
and 
http://serverfault.com/questions/80767/what-are-named-and-default-instance

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