While I understand what simulation and emulation mean in general, I almost always get confused about them. Assume that I create a piece of software that mimics existing hard
In computer science both a simulation and emulation produce the same outputs, from the same inputs, that the original system does; However, an emulation also uses the same processes to achieve it and is made out of the same materials. A simulation uses different processes from the original system. Also worth noting is the term replication, which is the intermediate of the two - using the same processes but being made out of a different material.
So if I want to run my old Super Mario Bros game on my PC I use an SNES emulator, because it is using the same or similar computer code (processes) to run the game, and uses the same or similar materials (silicon chip). However, if I want to fly a Boeing 747 jet on my PC I use a flight simulator because it uses completely different processes from the original (there are no actual wings, lift or aerodynamics involved!).
Here are the exact definitions taken from a computer science glossary:
A simulation is a model of a system that captures the functional connections between inputs and outputs of the system, but without necessarily being based on processes that are the same as, or similar to, those of the system itself.
A replication is a model of a system that captures the functional connections between inputs and outputs of the system and is based on processes that are the same as, or similar to, those of the system itself.
An emulation is a model of some system that captures the functional connections between inputs and outputs of the system, based on processes that are the same as, or similar to, those of that system, and that is built of the same materials as that system.
Reference: The Open University, M366 Glossary 1.1, 2007