Both are ceremonies to mark a death, and the line between them is one of tone and timing rather than rule.
A funeral
Usually held within days of the death, with the person present in casket, and often followed directly by burial or cremation. It carries the weight of the loss openly, which many families need it to do.
A celebration of life
Often held later — sometimes weeks or months — the mood is lighter, the venue can be anywhere from a garden to a club rooms, and the format is more open: stories, photographs, food, music.
Some families do both: a small, private funeral for those closest, then a larger celebration once people can travel and everyone has caught their breath.
Choosing
Ask what the people left behind need most. If they need to grieve together now, hold a funeral. If they need time first, a later celebration gives them that without losing the chance to gather.