Difference between llama and alpaca
As you can see from the photo below, there really are a lot of differences between llamas and alpacas. The llama is roughly twice the size of the alpaca and the llama has a very coarse outer coat over a softer inner coat - as opposed to the alpaca, which has a very fine, single coat. In addition, the llama produces far less fiber per animal than the alpaca, despite its much larger size.
This is because the alpaca was domesticated and carefully bred for over 5000 years as a luxury fiber-producing animal. The llama has been bred for the same amount of time as a pack-carrying animal. The alpacas in the photo below are recently shorn but you can see many photos of full-fleeced alpacas elsewhere on this website.
From time to time, I will hear people say that alpacas have a nicer disposition than llamas or vice versa. Neither of these statements is true. Both are very friendly, curious and easily trained and handled as long as they were not handled incorrectly by their original owners. Despite being an alpaca breeder, I will admit that llamas seem to remain calmer when they are not with their own kind. This should not be used as an excuse to keep one alone in a field though. Both are herd animals and need other members of their own kind to live with. Keeping a llama or alpaca alone is very cruel.
The llama and the alpaca can interbreed and produce live offspring, and those offspring are also fertile. There is no point in doing this on purpose, however. The result of such a breeding would be an animal that was neither as strong as the true llama nor would it have as nice a fleece as a true alpaca.