What is the difference between order status and order state

http://stackoverflow.com/questions/9627354/what-is-the-difference-between-state-and-status-column-in-table-sales-flat-o

State is used by magento to tell if the order is new, processing, complete, holded, closed, canceled, etc.; while
Statuses are the one that YOU would be defining at the backend in System -> Order Statuses. Magento displays
order STATUSES and not STATES in the backend order detail page to let you know which status is assigned as
per your mapping. Remember, multiple statuses can be mapped with one state, while vice versa is not possible.
Consider an example, your customer places an order as Cash on Delivery, you will need something like
COD_Pending as the order status so that you know it is not yet paid. Magento will have state new for this,
which makes you unpredictable of what kind of transaction is this, COD or Prepaid. The STATUS can be
anything, as you define, for your understanding; while STATE is something which Magento needs to
understand, internally.

In short, Magento uses order state internally for processing order, whereas order status are used by store owners
to understand the exact order flow where one state can be assigned to multiple statuses.

Order States: These are fixed order states which magento uses internally to maintain order flow and show
various order actions. The fixed states are New, Processing, Pending Payment, Payment Review, On Hold,
Complete, Cancelled, Closed.
Order status are not displayed anywhere, but are used by magento internally.

Order Status: These states used for display purposes. Each states belongs a order status, and multiple states can
belong to a single order status. We can also added new states from System -> Manage Order Statuses
Order Status are defined in sales/config.xml in global -> sales -> order -> states, we add new order states from
here as well.
Order states are stored in table ‘sales_order_status’

The table ‘sales_order_status’ only has label and code for each order status.
We have another table ‘sales_order_status_label’ which defines order label per store, so different stores can
have different status labels

Another table ‘sales_order_status_state’ stores the association of order status to order state.

Return Order Management RMA

Credit Memos & Refunds

After an order has been paid for and invoiced, all of the order, or a portion of it, can be refunded by issuing a
credit memo. A credit memo differs from a refund because the amount of the credit is restored to the customer’s
account where it can be applied to future purchases, rather than returned to the customer as cash. In some cases,
a refund can be given at the same time that a credit memo is issued, just as payment can be made at the time of
invoicing.