Groupings  
Say there are four fruits, mango, apple, orange and banana.
Chubby is asked to take (eat) any two of the fruits. How many choices does Chubby have in selecting the fruits she wants to eat? Chubby may take what she wants in any one of the following ways,
• No Preference to the Order in which the objects are chosen
In thinking of the number of choices available to Chubby, we do not pay any attention to the order in which the fruits are being chosen. We only think of what the fruits chosen are?
We say Chubby can choose a Mango and an Orange. This happens both when Chubby chooses
Since we do not give preference to the order in which the fruits are chosen, we consider both of those to represent the same result (grouping). Thus there are six possible choices for grouping the 4 fruits taking 2 at a time. 
Arrangements  
Say there are four letters A, B, C, D.
Chikky is asked to frame all possible words using two letters at a time. How many words can Chikky form. The Word Formed by Chikky may be
• Preference to the Order in which the objects are chosen
Since what we are forming are words, AB and BA are to be considered as two different entities, though both of them contain the letters A and B only.
This implies that we are giving preference to the order in which we are choosing the letters. We say Chikky framed the word
Since we give preference to the order in which the letters are chosen, we consider both of those to represent different results. Thus there are 12 possible words (arrangements) that can be formed using the 4 letters taking 2 at a time. • Groupings in this case
If we do not give preference to the order in which the letters are chosen, then the words AB and BA would represent the same possibility. Thus we would be having only 6 possibilities.
There are 6 possible groups (groupings) that can be formed using the 4 letters taking 2 at a time. 
Permutations ≡ Arrangements  
"Permutations" is a term used to indicate arrangements. Permutations represents
In thinking of permutations we give preference to the order in which the objects involved are chosen. The number of permutations implies the number of arrangements. Each of the arrangements is called a permutation. Illustration
There are four games Tennis, Cricket, Football, Basketball.
A student can choose to play any two games, the first game to be played in the first period and the second to be played in the second period. The choices available to a student would be
The number of choices available to a student would be equal to 12 which is given by

Combinations ≡ Groupings/Selections  
"Combinations" is a term used to indicate groupings/selections. Combinations represents
In thinking of combinations we do not give preference to the order in which the objects involved are chosen. The number of combinations implies the number of groupings/selections. Each of these selections/groupings is called a combination. IllustrationThere are four games Tennis, Cricket, Football, Basketball. A student can choose to play any two games. The number of choices available to a student would be
The number of choices available to a student would be equal to 6 which is given by

Where does the confusion lie?  
In problem solving, one major judgment to be made is whether to apply the concept of permutations or combinations to a certain case.
The rule/principle that should guide your decision making is simple. Wherever the order in which the objects or things are considered is important, use permutations and where the order need not be considered use combinations.
Please don't try to remember just by examples. Use examples as a tool to enable your understanding only. It would not be possible to visualise all possible examples and list out cases where permutations are to be applied and cases where combinations are to be applied. Working out a number of examples would enable you to clarify the difference between permutations and combinations. Understanding the difference makes your problem solving task simple. True, it is not as easy as is said. 
Author Credit : The Edifier  ... Continued Page 2 