Diffeomorphism and homeomorphism are both bijective mappings, but differ in their continuity requirements; homeomorphisms are continuous, while diffeomorphisms require continuous differentiability of both the function and its inverse. This means that all diffeomorphisms are homeomorphisms, but not vice versa. For manifolds in dimensions less than four, homeomorphic manifolds are also diffeomorphic, which is not the case in higher dimensions where exotic structures can exist. Examples illustrate that while a mug and a torus are homeomorphic, they are not diffeomorphic due to the handle's non-differentiable nature. Understanding these distinctions is crucial for grasping the complexities of differential geometry.