From a functional standpoint, a 2.5-inch drive and a 3.5-inch drive are identical. They use the same technology to accomplish the same goal. They differ, however, in size and form factor, as well as differences in the hardware used to connect them to a computer.
How it works
Both types of hard drive use magnetic resonance to align particles in a particular region of a metal platter in a binary fashion. Each region can be aligned to represent either a 1 or a 0. The size of the region is one of the limiting factors of total storage space. A read/write head moves over the surface of the drive and can change or read the alignment of a region.
2.5-inch drives vary from 3.5-inch drives in that, obviously, they are smaller. This means that a 2.5-inch drive will always have a smaller capacity than a same generation 3.5-inch drive. On the other hand, a 2.5-inch drive that spins at the same speed as a 3.5-inch drive is inherently faster.
Another difference is in the size of the connectors that attach the drive to a computer. Some 2.5-inch drives use a smaller version of the SATA (Serial ATA) interface than 3.5-inch drives do, while other 2.5-inch drives use exactly the same connector. Both connectors are electrically compatible. You can use a simple adapter to connect a 2.5-inch drive to a desktop computer.