Absolute path is the complete url
<img src="http://site.com/folder/file" />
<a href="http://site.com/folder/file"></a>
Relative is taking the current address as the starting point.
this line used on"http://site.com" will call the file located on "http://site.com/file" and
<img src="folder/file" />
will call the file located on "http://site.com/folder/file". So, as you can see, it would be easier to work with relative paths on your own site but absolute paths are needed to link many sites. Also, relative paths gives you the option to keep your links/images working when you move your site.