Vertical scaling and horizontal scaling are two approaches to improving the capacity and performance of a system, particularly in the context of servers, databases, and other IT infrastructure.

1. Vertical Scaling (Scaling Up)
Vertical scaling involves adding more power (CPU, RAM, storage) to an existing machine. This approach enhances the performance of a single server or node by upgrading its hardware resources.

Key Characteristics:
Increased Capacity: By adding more resources to a single server, it can handle more load or perform tasks faster.
Simplicity: Vertical scaling is often simpler to implement because it involves upgrading the existing system rather than adding new components.
Single Point of Failure: Since all operations are still handled by a single machine, this approach can create a bottleneck and a single point of failure.
Cost: Upgrading to more powerful hardware can be expensive, and there’s a limit to how much a single machine can be upgraded.
Example: Moving from a server with 8 GB of RAM and a quad-core processor to one with 32 GB of RAM and a 16-core processor.

Use Cases:
Suitable for applications that cannot be easily distributed across multiple machines.
Common in scenarios where a single server needs to handle significant loads, such as with some databases or legacy applications.

2. Horizontal Scaling (Scaling Out)
Horizontal scaling involves adding more machines (servers, nodes) to your pool of resources. This method increases the overall system capacity by distributing the load across multiple devices.

Key Characteristics:
Increased Redundancy: By having multiple servers, the system is more fault-tolerant. If one server fails, others can take over.
Scalability: You can scale out almost indefinitely by adding more servers as needed, which is ideal for handling large-scale applications.
Complexity: Horizontal scaling can be more complex to manage and requires proper load balancing, data replication, and possibly changes to the application architecture to support distributed processing.
Cost: It can be more cost-effective in the long run, especially for cloud-based systems where resources can be added as needed.
Example: Adding more web servers to handle increased traffic to a website, with a load balancer distributing requests among the servers.

Use Cases:
Ideal for cloud computing environments and distributed systems like microservices, where applications are designed to run on multiple nodes.
Common in large-scale applications like social networks, e-commerce platforms, and content delivery networks (CDNs).

Summary of Differences

Conclusion
Vertical Scaling is best for simpler, more centralized applications with a predictable load, but it has limits in terms of capacity and can be costly.

Horizontal Scaling is more suited to modern, distributed applications where you need to handle a large number of requests or operations by spreading the load across multiple machines. It provides better redundancy and scalability but comes with added complexity.