At the 1998 Autodesk Design World, Bill Wittreich of Wittreich & Associates, gave a presentation titled Beyond CAD into GIS. What follows is paraphrased from a portion of his talk.
AutoCAD Map adds GIS features to the base AutoCAD product and, as such, these features help define the difference between CAD and GIS. In short, the difference between CAD and GIS is the difference between a drawing and a spatial database.
CAD models things in the real world. GIS models the world itself. Therefore, GIS uses geographic coordinates systems and world map projections while CAD coordinates are relative to the object being modeled and are not usually relative to any particular place on earth.
CAD objects include lines, circles, arcs, text, etc. using layers, blocks, internal data, and dimensions. CAD objects don't know about each other, even though they may touch or overlap.
GIS objects know about each other:
The primary difference between CAD and GIS is topology. GIS has it, CAD doesn't. In a CAD environment, the objects (lines, polylines, points, etc.) have no relationships between them. Topology brings these objects together into logical groups to form real world models.
Topology and spatial analysis differentiate GIS from CAD.
GIS separates object storage from object display, combining data form multiple sources into a virtual data warehouse. That data can then be used in any number of separately defined analyses or presentations. CAD systems carry baggage such as line color, line width, etc. that is not relevant to the data itself.
GIS systems are usually disk-based and can model larger areas than CAD implementations which are usually memory-based. For instance, CAD files are typically smaller, such as product designs as compared to regional, state, or even world models in GIS.
While the distinction between CAD and GIS is grey now, as features are added to CAD systems, the distinction will blur even more.