The difference between bison and buffalo has to do with the thick fur, short horns, massive head and distinct hump present in bison. Though they belong to the same family of mammals, the American bison is a distinct genus within the Bovidae family.
Bison are well adapted to cold weather conditions, while buffalo, such as the African cape buffalo and Asian water buffalo species, tend to live in warmer climates. Buffalo have much longer horns, normally used to move brush or toss cool mud onto their bare skin for protection from the sun. Alternately, bison use their short, sharp horns for defense against predators.
The case of mistaken identity began when early European settlers arrived in North America and misidentified the bison as a species of buffalo they were familiar with. A clear distinction would later be identified, but the misnomer stuck around. The terms buffalo and bison are almost universally used interchangeably by most Americans when referring to the American bison.
Bison were never fully domesticated by early agricultural societies, while it is believed that both buffalo species are the root of modern beef and milk cattle for most of the world. The similarities between domestic cows and wild buffalo species are far greater than those shared by bison and buffalo.