Traffic separation: ATC will give positive instructions that prevent two aircraft from getting too close to each other. Example: A is told to maintain 2000' or below, B is told to maintain 3000' or above.
Traffic information: ATC will give instructions that may or may not allow two aircraft to get close to each other. But they will tell each pilot where the other aircraft is. "See and avoid" applies! Example: A is joining the circuit on early left downwind. B is vacating the circuit via left crosswind. So A is told about B and vice versa, so the pilots will look out for each other and adjust their flight paths accordingly.
Note that in the second paragraph, the ATC instructions are quite vague, so there is a possibility that the two aircraft could be close to each other. On the other hand, ATC can be less specific, so can cope with more aircraft at one time. As long as both pilots are alert and the controller doesn't become too "controlling", both systems work well.
A good introduction to different airspace classes may be found
here.