The basic difference is that "external" pugilistic forms cultivate a person's physical prowess in terms of strength, dexterity, motor coordination etc, much like any other sporting exercise like aerobics, except that there is an obvious martial focus. This is why this type of pugilistic form becomes unsuitable eventually for people reaching into their old age, as with any other vigorous activity.
The "Internal" pugilistic form, on the other hand, cultivates a person's internal control and breathing. Its primary characteristic is its extremely mind-directed consciousness. It is this, which makes for its well-known curative effect when practised over a period of time. That is how Taijiquan has also been established as a form of healing exercise.
There is also a frequent misconception that "kung fu" means martial arts that are Chinese in origin. The term "kung fu" or gongfu literally translated means "a skill achieved through diligent effort". It is not synonymous with "Chinese Martial Art" per se. A skilled artist like Picasso is considered to have good gongfu in terms of his painting skill or ability.
Likewise, External Styles are commonly depicted as "Hard" and Internal Styles as "Soft". However, the difference may be due to philosophical and geographical reasons. External styles simply meant that those styles originated from Da Mo and the Shao Lin temples. Da Mo who was from India, and hence from outside China - external. And internal styles meant that these were founded on the Taoist philosophy of Lao Tze, which were created inside China - internal.
