An unmanaged switch is a glorified hub. It means that the switch does
its thing with no user interaction. For most people, that's quite all
right. The switch's benefits over a hub are full bandwidth to each
port, rather than smushing all the data over all the ports like a hub,
and dealing with collisions.
A Managed switch has its own IP address, and has a telnet and maybe a
web-based interface to monitor and secure access to each port on the
switch. A managed port can have VLANs, which effectively break up
different ports on a switch into different switches. This can be
useful when you have a lot of ports but you'd like to, forinstance,
separate direct connection to the Internet for a few computers, from
the rest of your local area network.
A managed switch can tell you about excessive usage on certain ports.
It can be used to limit the number of IP addresses that one port can
service. This is important if you want one computer for one port,
forinstance. It makes sure nobody plugs a hub into a wall and shares
off more connections without talking to the administrator first. A
managed switch can also be used to enable or disable specific ports
without unplugging a cable.
This pretty much scratches the surface of what a managed switch can do
for you. There is also logging ability, traffic management, and a lot
more. But if you never need any of this, an unmanaged switch is
adequate for many businesses.