I like Lasse's generalization. Other characteristics of *Product* development versus projects that I've noticed:
- Products have multiple releases
- Products tend to keep the same team together
- Products are revenue generating, not cost saving
I'm also seeing many IT shops split up their development into "products" and "projects." Products are those areas where they choose to create a competitive advantage, something they feel will help them win more business (e.g. a new provisioning system for distribution to channel partners). Projects are run in areas they want to achieve technical parity (e.g. implement a new packaged CRM application).
Hope that helps.