What is the difference between compost and mulch?

The difference is purpose rather than material, and the confusion arises because compost can be used as mulch while most mulches are not compost.

Compost is decomposed organic matter used to improve soil. It is dug in or spread as a thin layer to be worked down by worms, and it adds nutrients, improves structure so heavy soil drains better and light soil holds more water, and feeds soil biology. It is a soil amendment.

Mulch is any material laid on the surface and left there. Its jobs are suppressing weeds, retaining moisture, moderating soil temperature and reducing erosion. It works by covering, not by mixing in. Bark chips, straw, gravel, leaf mould and even landscape fabric all count.

Using the right one for the job matters. Digging bark chips into soil is actively harmful, because the decomposition of woody material temporarily consumes available nitrogen and starves plants. That is why bark belongs on the surface, where the effect is negligible.

Compost used as mulch works well and does both jobs, though it is more expensive than bark and breaks down faster so needs replacing more often. It also suppresses weeds less effectively than a coarse mulch, and its nutrients can encourage weed seeds that land on it.

Application depth differs. Mulch wants a substantial layer, commonly five to eight centimetres, to block light effectively. Compost as a top dressing is spread thinner.

One consistent rule: keep either material away from plant stems and tree trunks. Piling material against the stem holds moisture there and causes rot, which is why mulch heaped around trees is a common and damaging mistake.