Clients often ask me the difference and I give them a simple answer that normally puts an end to the conversation and their questions, much like the answer shane thomas gave, but less detailed.  Direct is people putting in your url in the top and organic is people searching for you.  Here is an example: If I want to buy a book i type in (direct traffic) but if i forgot where to buy a book online i search for "where to buy a book online" which directs me to (organic traffic).  When i explain it like this, a light bulb goes off and they understand.  Hope that helps.

In 2007, Google announced a campaign against paid links that transfer PageRank.[29] On June 15, 2009, Google disclosed that they had taken measures to mitigate the effects of PageRank sculpting by use of the nofollow attribute on links. Matt Cutts, a well-known software engineer at Google, announced that Google Bot would no longer treat nofollowed links in the same way, to prevent SEO service providers from using nofollow for PageRank sculpting.[30] As a result of this change the usage of nofollow led to evaporation of PageRank. In order to avoid the above, SEO engineers developed alternative techniques that replace nofollowed tags with obfuscated Javascript and thus permit PageRank sculpting. Additionally several solutions have been suggested that include the usage of iframes, Flash and Javascript.[31]
Search engines may penalize sites they discover using black hat methods, either by reducing their rankings or eliminating their listings from their databases altogether. Such penalties can be applied either automatically by the search engines' algorithms, or by a manual site review. One example was the February 2006 Google removal of both BMW Germany and Ricoh Germany for use of deceptive practices.[53] Both companies, however, quickly apologized, fixed the offending pages, and were restored to Google's list.[54]
In March 2006, KinderStart filed a lawsuit against Google over search engine rankings. KinderStart's website was removed from Google's index prior to the lawsuit and the amount of traffic to the site dropped by 70%. On March 16, 2007 the United States District Court for the Northern District of California (San Jose Division) dismissed KinderStart's complaint without leave to amend, and partially granted Google's motion for Rule 11 sanctions against KinderStart's attorney, requiring him to pay part of Google's legal expenses.[69][70]

Look to successful brands to see how they keep customers engaged. Do you need to constantly update content, as Home Depot does with its seasonal DIY tips? Or do you need to position yourself as a lifestyle brand, following in Red Bull’s footsteps by running a series of videos on YouTube? Whatever method you adopt, it’s important to have some quantifiable way to measure how successful you are, so keep your ultimate goal in mind as you evaluate your return on investment.

Although it may have changed slightly since BrightEdge published its report last year, the data still seem to hold true. Organic is simply better for delivering relevant traffic. The only channel that performs better in some capacities is paid search ads, but that is only for conversions, not overall traffic delivery (Paid Search only accounted for 10 percent of overall total traffic).