Formal communication is communication that takes place in a company in a vertical manner from management to employees or from employees to management, or it may be in a horizontal manner with workers at the same level. Informal communication occurs, when employees communicate with each other outside of the formal organizational communication structure put into place.
Informal communication would include employees talking to each other around the water cooler. Formal communication could include managers getting together for a meeting or a human resources manager giving a presentation to employees. When people in companies communicate formally, there's usually some type of documentation, such as the minutes of a meeting, while this type of documentation is typically absent from informal communication.