The principal difference is epistemological, meaning where and how the teachings of the Christian faith are revealed and how they may be legitimately applied and developed. Otherwise, there are superficial differences in church organization and worship and some semantic arguments that when you drill down in a peaceful and amicable way amount to very little.
Catholic epistemology holds that truth is revealed by God and entrusted through the apostles to the Church under a pope going back to St. Peter, out of which sprung the Bible (with 73 books, per the Council of Trent), theology, seven sacraments, etc. Protestant epistemology holds that divine revelation is confined to the 66 biblical books that Martin Luther approved of, subject to the interpretation of the individual good faith Christian; the Protestant consensus is that the Bible justifies only two sacraments and theologies vary widely.
Traditionally, almost all Protestant denominations hold to some version of Luther's three solas (sola scriptura, sola gratia, and sola fide, meaning only scripture, only grace, only faith). These were thought to divide Catholics and Protestants, but as the heat of controversies simmered down, it seems that the theological meaning and significance of scripture, grace and faith are really very similar. Catholics and Protestants both acknowledge that the Bible is a central touchstone of Christian teachings. Similarly, Catholics and Protestants both believe that salvation comes as a gift (gratia) from God through Christ. Finally, Catholics and Protestants both believe that faith is what allows believers to receive the benefits of the salvation work of Christ.
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