Microsoft Security Essentials is a free download for home computers running on the Windows operating system. This software helps protect your computer from viruses, spyware, and other malware.
Windows Defender is built into Windows Vista and Windows 7 and it’s available as a free download for Windows XP. Windows Defender helps protect your computer from spyware and some other potentially unwanted software, but it will not protect against viruses.
In other words, Windows Defender only protects against a subset of known malicious software but Microsoft Security Essentials protects against ALL known malicious software.
If you have Windows Vista or Windows 7 and you install Microsoft Security Essentials, the installation process will automatically disable (but not uninstall) Windows Defender. If you are using Windows XP and you download and install Windows Defender and in addition you want to install Microsoft Security Essentials, you will see a warning to uninstall Windows Defender before completing the installation for Microsoft Security Essentials.