Difference between Flash And AIR

At a very high level, Flash Player is a plugin used by browsers to display Flash content typically hosted on a server.  AIR is a runtime that displays a superset of Flash Player content, but does so in an application format installed on the users system or device.  In addition, there are differences in how the two interact with the file system and security policies.

http://www.adobe.com/products/flashplayer/faq.html