Whats the main difference between addon domains and normal hosting?

Addon domains have less number of features are limited in many ways.

They do not have their own cpanel.
They do not have their own fantastico.
Creates issues with certain script installations or display in browser.
Does not have parked domains.
Does not support sub domains

and many many more.

Addon domains are mostly good for very small static websites that do not need any features. Addon domains do have email access.