WSS3.0: Master Pages vs Themes

Master Pages

• Can totally change the look of a site.
• Can hide SharePoint components that you don't want to use.
• Will allow you to alter the layout of the page, in addition to changing the colors and images used in the site.
• Will not affect _layouts pages. You will need to use a workaround. Application pages will not be changed.
  

Themes

• Can re-skin the layout of a site to use different images and colors.
• Can only hide SharePoint components that can be controlled through hiding it in the CSS (display: none set on a class/ID).
• Affects _layouts pages. But you will need to apply theme to each subsite individually.
  
• Can be used as an alternate CSS file application method, similar to alternate CSS setting in MOSS sites.
• Are installed on the web server unless you customize the file.