The difference between internal and external fertilization is that internal fertilization occurs inside the body, whereas external fertilization happens outside the body. Fertilization is the process by which a sperm cell and an egg cell unite to form a completely new individual.
External fertilization requires the presence of water for the sperm to be able to unite with the egg. Both eggs and sperm are released into the water, and the sperm must swim to reach the eggs. Organisms that use external fertilization to reproduce must either live in the water or return to the water for reproduction.
With internal fertilization, the presence of water is not needed. Animals that have internal fertilization have completely transitioned to life on land. Fewer young are produced because the mother's body will protect any fertilized eggs from being devoured by predators, so large numbers of eggs aren't needed.