In React, components can be built using either class components or functional components, each offering unique benefits and use cases. Class components, the traditional way of creating components, are ES6 classes that extend React.Component and come with built-in lifecycle methods, such as componentDidMount and componentDidUpdate. This allows developers to manage complex state and side effects within the component class. On the other hand, functional components are simpler, using JavaScript functions to return JSX. Initially, they were stateless and lacked lifecycle methods, but with the introduction of Hooks in React 16.8, functional components gained the ability to manage state and side effects, making them as powerful as class components.

The primary difference lies in their syntax and capabilities: class components involve more boilerplate code and a steeper learning curve due to their use of this and lifecycle methods, whereas functional components offer a more concise and readable syntax. The addition of Hooks has significantly leveled the playing field, allowing functional components to handle state, context, and side effects without the need for classes. As a result, functional components have become the preferred choice in modern React development due to their simplicity, ease of testing, and better performance characteristics. Understanding these differences is crucial for leveraging React effectively and choosing the right approach based on the specific needs of your application.