What is the difference between kerning vs. letter spacing?
Any font has built-in spacing determined by the "side bearing" of each character. In metal type, the side bearing is the physical right or left edge of the individual piece of type that determines its spacing from the characters on either side. Digital fonts mimic this in the basic design process.
"To kern" means to adjust the spacing between a pair of letters, numerals, punctuation, etc. (properly "glyphs") so that their spacing looks correct. The letters AV, for example, have to overlap in any usual typeface, otherwise at least one them ends up looking lost and bewildered. Their kerning is tightened to snug them up to one another. An italic f will collide with a following question or quote mark in some fonts, so the kerning must be opened up from the default spacing.
An ancient scribe could kern effortlessly with pen and ink, and if you read old manuscripts you'll see lots of places where a letter intrudes into the space of the one next to it. With metal type, it wasn't so easy. Kerning required cutting away some of the metal base, or table, of the character. The amount of time, skill and work involved is left as an exercise for readers whose minds are in need of a little boggling. The shapes of the letters in metal type intended for long passages of text such as books, or especially newspapers, were designed to minimize the amount of kerning that would be necessary.
Kerning tables built into a digital font assign preset kerning values to specific letter pairs, according to the designer's best estimate of how they should look. There can be a dozen or so pairs (or none!) in a cheapo font, thousands in a high-end one. No matter how thoroughly and well a kerning table is built, though, there will still be situations where some awkward combination requires that the kerning be loosened or tightened from the preset values of the glyphs.
Letter spacing (often "tracking" in software applications) adjusts the spacing between all the glyphs in a piece of text. This can help to make a page look a little more open and inviting, for example, especially with a similarly open leading. Very large type, such as a big headline, almost always benefits from tightening the tracking. Tiny type, such as in captions or footnotes, is made more readable by opening the letter spacing a bit, especially if the paper is absorbent and will allow the ink to spread a little.
A final note: Use caution with both kerning and tracking. Tracking is very often wildly overdone, kerning is seldom done enough.