Resource : Embeds resource into the
assembly (or culture specific
satellite assembly)

Content : this leaves resource as
loose file and upon compilation this
resource information is not embedded
to assembly. Instead,it adds custom
attribute to the assembly
(AssemblyAssociatedContentFile) which
records the existence and relative
location of file.
It is also possible
to access the resource file without
adding into the project. However,with
this approach management of resource
file becomes bit difficult. However,
this approach is useful if resource
file is generated dynamically using
some runtime information. In such a
case,resource file will not be
available at compile time so can not
be added to project.

资料来源：Resources in WPF.