Here are a couple stabs at defining the difference:
1. Among sailing vessels, the distinction between ships and boats is that a ship is a square-rigged craft with at least three masts, and a boat isn't. With regard to motorized craft, a ship is a large vessel intended for oceangoing or at least deep-water transport, and a boat is anything else.
Try this: ships have to be big enough to carry boats, and boats have to be small enough to be carried by ships.
2. distinction between a ship and a boat varies depending on regional definitions, but as a general rule, a boat can fit onto a ship, but a ship cannot fit onto a boat. A ship, in other words, is a very large ocean-going vessel, while a boat tends to be much smaller. Additionally, a ship usually is defined as having a displacement larger than 500 tons.
3. According to the Navy sailor who conducted our tour, "the difference between a ship and a boat is that you can put boats on a ship, but you can't put ships on a boat. But submarines are always boats." According to Chapman Piloting, Seamanship and Small Boat Handling (a great reference book), the dividing line of size between boats (small) and ships (big) is 65 feet. To further confuse things, the same reference states that a "yacht" is a "sail or power vessel used for recreation and pleasure, as opposed to work," but also adds that the term is usually not used for boats under 40'. I've also heard that it's a boat when you have to work on it but a yacht when you take your sweetheart out on it.
http://www.straightdope.com/columns/read/754/whats-the-difference-between-a-boat-and-a-ship
http://www.wisegeek.com/what-is-the-difference-between-a-ship-and-a-boat.htm
https://web.archive.org/web/20040815170235/http://windom.cybox.com/logs/1999/05.28.html