Assalamu alaikum,
I came across this at islamonline.net and found it very helpful to my understanding. Perhaps it may benefit others as well, insha'allah:
Actually scholars of Hadith have differentiated between two distinct types of Hadith which are termed as al-hadith an-nabawi and al-hadith al-qudsi. The former type is restricted to the sayings of the Prophet (peace and blessings be upon him), while the latter pertains to the sayings of the Prophet through the medium of divine inspiration.
Qudus means holy or sacred. The sayings that are termed as al-qudsi are such that while the Prophet (peace and blessings be upon him) was relating them to his Companions (may Allah be pleased with them), he mentioned that Allah, in effect, had communicated them to him. However, these communications do not form part of the Qur�an.
Such reports are included within the category of hadith qudsi. An example of this type of hadith is one that has been reported by Abu Hurayrah (may Allah be pleased with him) in which it is mentioned that the Prophet (peace and blessings be upon him) said that Allah said, �If My servant likes to meet Me, I will love to meet him.�
While the common factor between the hadith qudsi and the Qur�an is that both contain words from Allah that were revealed to the Prophet (peace and blessings be upon him), they are, nevertheless, distinct from each other as pointed out here:
1. The Qur�an contains the verbatim words of Allah, while a hadith qudsi contains the message of Allah conveyed to the people by the Prophet (peace and blessings be upon him) in the Prophet�s own words.
2. The Qur�an is inimitable and unique, but such is not the case with a hadith qudsi. This is so because the latter is not the verbatim word of Allah.
3. The Qur�an is recited in every Prayer but a hadith qudsi cannot be recited in any Prayer.
Elaborating on the differences between Hadith Qudsi and Hadith Nabawi and between Hadith Qudsi and the Qur�an, we�d like to cite for you the following:
We can also say that a hadith qudsi (Arabic plural ahadith qudsiyyah) is a statement in which Prophet Muhammad (peace and blessings be upon him) reports a statement and he refers it directly to Allah. The regular hadith or what is generally known as a hadith Nabawi is a hadith in which one of the Companions reports the Prophet�s statements, deeds, or things that happened in his presence and he approved of. There are more than one hundred qudsi hadiths. They are very beautiful and deal mostly with spiritual and ethical subjects.
To clarify more, we can explain that the scholars of Hadith have mentioned five main differences between the Qur�an and the hadith qudsi:
1. The Qur�an was revealed to the Prophet (peace and blessings be upon him) verbatim, that is, both its words and meanings are from Allah. The hadith qudsi was not a verbatim revelation; its words are from the Prophet (peace and blessings be upon him).
2. The Qur�an was revealed via Angel Jibreel while the hadith qudsi may have been inspired by other ways, such as in the form of a dream.
3. The words of the Qur�an are miraculous or inimitable (mu`jizah) while the words of the hadith qudsi are not of this nature.
4. The Qur�an is recited in formal Prayers (salah) but the hadith qudsi cannot be recited in Prayers.
The above is excerpted, with slight modifications, from: Differences Between Hadith Qudsi, Hadith Nabawi & the Qur�an