Hi Sunny,
The basic difference is this:

Optical zoom is produced by the hardware, ie, the lens in the camera.
Digital zoom is produced by the software in the digital camera.
When u do optical zoom, wat happens is that the camera lens adjusts itself and there's a change in the focal point of the lens, so the subject appears closer.
When u do digital zoom, wat the camera actually does is, it crops(cuts) the center portion of the image and enlarges it to the original size of the image. So, it appears to have zoomed in. But actually, the image quality gets lowered in digital zoom. There's no change in lens position.
So, it's always better to go for optical zoom in digital cameras. It's a wise option to disable digital zoom too.

Hope this clears ur doubt... chill...