Extracts are natural flavorings and tend to have a slightly shorter shelf life than flavorings. Extracts occur when the the essential oil has been squeezed from the primary ingredient (such as vanilla). The resulting oil is much more concentrated with intense flavor but more pure and clear tasting.
Extracts are more often used where intense flavor is needed such as in candy making or frostings, etc. Flavoring and extracts can be substituted for each other in most recipes – just remember when using an extract to use a few drops in place of a teaspoon of flavoring.