In proper MS marketing form I think there is a difference in two very similar products (and their names don't help the consumer at all). Office online is a web-based version of these popular apps (1:1 parity of OS software? I am not sure). There is also a $99 subscription model that allows you to install these apps for 5 computers (local OS software installs) + the benefits of these web apps + X gigs of One/Sky Drive + some Skype stuff.
I have been a happy subscriber to the $99 version (with OS apps) and I have been very happy with the price point. Have pretty much moved over to OneNote from EverNote over the past year and also love the ability to have a local install of Excel, but be able to edit inline on the web when needed.