1) Distro deal with major label = You sell your finished product, i.e. pressed CD to them at a price (for example, $10 - 12).
The label will take the product and push it into stores, trying to sell them to the retail stores. If they like it and take it, the CD will be marked up to $18 - 20. That's the retail store's profit margin. In addition, the label will draw a 20 - 30% commission off the retail price from the artist. So effectively, you are only getting $7 - 8 per unit CD.
And the label has only a distribution deal. So no marketing (or minimal) effort will be spent on you.
2) Record deal (licensing deal) = The company takes you under their wings and 2 scenarios might happen:
a) You become an employee. That means, you work when the company tells you to work. You dance and sing like how they groom you to be. You take home a salary (don't be mistaken that this might be a huge sum even if you are at the peak of your career and you are shit hot famous.) Good marketing dollars will be spent on promoting you though. Of course, if you are not making it after a while, your contract will be terminated and it's back to reality.
b) If you are those acts who are 'creative' and want to be seen as artists, you sign a deal where the company will finance your album, music video, photo shoot, etc. But you'd only get 5 - 10% (if you are very lucky) off all profits. Why so miserable? Cuz they are spending a lot of money on you what... And if you finished up the hours allocated to you for recording, you can ) either pay out of your pocket to carry on yourself or b) finish the rest of the album using sessionists which is still on your tab, of course.
All 2 contracts with the labels are often binding for a few years. If you decide to carry on with the label, you are not allowed to sign with another label for a stipulated amount of time, eg. 3 - 5 years, effectively killing your career.
Was hanging out with the embryo last night and chatting about this. His industry experience is pretty wide. We agreed that when it comes to the music business, the music often is the least important thing of all. Of course, all this talk is moot if the A&R guy decides your music is turd and chuck the demo into the bin...