Question: Does anyone know how we can differenciate Order Status And Order State ?

Answer: 
The `order state` and `order status` are usually mixed up since their names and functions are similar.

An order state is a position of an order in the current processing flow. Magento has the following pre-defines order states:

```
New
Pending Payment
Processing
Complete
Closed
Canceled
On Hold
Payment Review

```

Each order state can have one or more order statuses assigned to it. This makes processing easier.

For example, a “Pending Payment” order state can have the following order statuses:

```
Pending Payment Paypal
Pending Payment Card
Pending Payment Store Credit

```

Magento provides a way for create custom order statuses. For this:

```
1. Admin Panel>System>Order Statuses;
2. click the "Create New Status" button;
3. fill necessary information in the "New Order Status" page;
4. click "Save Status";
5. assign a recently created  status to a particular order state.

```
The order status is just a label for the order state. It doesn't represent any logic or workflow. 
You could even assign the "status" closed for pending payments. 

If you have PayPal, CC and Checkmo as Payment options, you might want to assign different order statuses for each of those when there's a pending payment. Like pending CC, pending Paypal etc.