Master Page and Page Layout

The top-level SharePoint Server site for a site collection hosted on SharePoint Server 2010 has a special document library called the Master Page and Page Layout Gallery. All page layouts and master pages are stored in this document library. The Master Page and Page Layout Gallery supports versioning and workflow, so you can use those features for your master pages and page layouts.

(By default, SharePoint Server 2010 creates a master page gallery for every site; however, you can create only new pages with the page layouts stored in the master page gallery of the top-level site in the site collection).

Master page provide a consistent look and feel for your site. It contains controls that are shared across multiple page layouts, such as navigation, search and custom field controls.

Page Layout contains field controls and Web Parts. All page layouts reference a master page based on the CustomMasterUrl property of the SPWeb class.


Reference:
SharePoint Page Layouts and Master Pages (ECM)