What is the difference between internal and external fragmentation?

Internal fragmentation occurs when allocated memory is larger than requested, wasting space within allocated blocks - common in fixed-size allocation like paging (if process needs 1KB but page is 4KB, 3KB is wasted). External fragmentation occurs when free memory is scattered in small blocks, unable to satisfy large requests despite sufficient total memory - common in variable-size allocation. Paging eliminates external fragmentation but may have internal.