[neogodless]

It's best to define these words with feelings, and I feel like plugins are like a little box that is free to do "plugin" things within the box, but is otherwise merely co-existing within the browser, rather than integrating. Things like Flash, Silverlight, Java, etc. always did their own thing. Extensions are often tightly integrated into browser functionality, with interactions potentially happening in both directions. Custom buttons on the toolbar or context menu, with extensive access to your browser profile and perhaps cross-cutting concerns.

Another way to think of it is something you just plug in and use, like a vacuum cleaner. But an extension needs access to the browser API and may entangle itself.

I'm sure there are exceptions to those boundaries, such as Javascript being enabled to interact with Flash applications, but a plugin might operate without any real crossover with the browser functionality beyond existing in a window.