The difference between the PSAT and the SAT is that the PSAT score is not a required part of the college application process. However, the PSAT is considered for National Merit Scholarships.
The Preliminary SAT or PSAT is taken by students in their sophomore or junior year of college, while the SAT is taken either right before or during the early portion of a student's senior year. The PSAT is also significantly shorter than the SAT; total test time for the PSAT is several hours less than the SAT.
Students who opt to take the PSAT can have their scores submitted for National Merit Scholarship consideration. The competition for these financial awards is steep, but even being considered and receiving a commendation can enhance a student's college application. Even if a student does not receive a National Merit Scholarship, schools can be influenced to offer their own financial awards on the basis of the commendation letter.
The PSAT can also help a student identify areas for improvement for when they take the SAT. The questions on the PSAT are similar to that of the SAT, so a good PSAT score, in theory, indicates a student can achieve a satisfactory SAT score.