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So you might be asking yourself, "What's the difference between a plugin and a widget?" Well a widget will always be a plugin, but a plugin isn't always a widget. What I mean to say is a plugin is something that interacts in one way or another with WordPress. It may or may not be seen. For example, here are the plugins I have installed on my mmmstuff web site. The plugin Tweetly Updater posts an update to Twitter anytime I create or edit a blog entry. On the other hand, WordPress Stats allows me to see information about WordPress.
WordPress Stats is a plugin, but part of the plugin is that it has a widget built into it. So widgets use the plugin API, so they technically are plugins but widget's specific function are to work in these dashboard-like applications or to work on the front-end of the web site to perform different functions. So just remember, if you build a plugin it might be widget, or it might contain a widget within it; however, some plugins don't use widgets at all. Widgets are simply one of the tools available to WordPress plugin developers.
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