The policies of the Liberals and Conservatives are very similar. The major differences are in their allegiances to federal parties and in personalities. Historically, the Tories originated as the Prince Edward Island Conservative Party changing their name in 1942 to reflect the development of the federal Progressive Conservative Party.
The original Conservative Party opposed responsible government, and supported the elites who owned large landed estates on the island, while the Liberals were more sympathetic to tenant farmers. When the "land question" was settled as part of the terms of joining Canadian confederation in 1873 (money was provided to buy out the land owners, break up the estates and turn them over to residents), there was little left to distinguish the two parties.
Generally, however, the Conservatives have leaned slightly to the right and are more sympathetic to business while the Liberals slightly to the left. Traditionally, the Tories have done better among Protestant voters while Liberals have had more support from Catholics - accordingly, the Conservatives have tended to do slightly better in the easternmost region of the island which is more Protestant while the Liberals have tended to do better on the western end where there are more Catholics. However, politics on the island has never been sectarian and both parties have always had voters and members from both populations. Indeed, it has been the custom until recently for a Liberal incumbent of one denomination to be opposed by a Tory challenger of the same denomination and vice versa and this had tended to minimise religious sectarianism within the parties.
The Progressive Conservatives formed the government in Prince Edward Island under Premier Pat Binns, starting in 1996, however the party lost its bid for a fourth mandate, to Robert Ghiz and the Liberals. It became the official opposition on June 12, 2007.