After having seen this question floated in so many forums, I decided to write about it. First, the basics. These terms are used with respect to bugs. Severity and Priority are two attributes of a bug report. If you have seen Effective Bug Reports, you can see simple definitions of these terms.
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{ 5 comments… read them below or add one }
Severity is how sever the bug is, and Severity is decided by Test lead or Tester.
Priority is in what order bug should be get fixed and Priority is decided by Development Lead.
High priority, low severity.
Low priority, high severity.
Severity shows how critical the bug is and the priority tell how important the bugs is and when it has to be fixed.
Severity shows the criticality ( what is the impact of the defect? ) while the the priority shows importance of defects
In my opinion, severity means how badly particular bug may affect the system / functionality while priority means how soon that bug must be fixed.