Lan means "Local Area Network" and Vlan stands for "Virtual LAN".
There are no real differences between one and the other except that a vlan is used to create multiple broadcast domains in a switch.
Say for example you have one 48 port layer 2 switch.
If you create 2 vlans, one on ports 1 to 24 and one for ports 25 to 48, you can make one switch act like two.
One advantage of using vlans is that if you segment your network by department like this:
One class C network for Sales
One class C network for IT
You don't have to use different switches for different networks because you can just use one big switch and create different Vlans for each segment.
How to create a vlan depends on the switch in question.
In a cisco switch you can create vlans like this.
SwitchA(config)#configure terminal (enter in global configuration mode)
SwitchA(config)#vlan 3 (defining the vlan 3)
SwitchA(config)#vlan 3 name management (assigning the name management to vlan 3)
SwitchA(config)#exit (exit from vlan 3)
Now assigning the ports 2 and 3 to VLAN 3
SwitchA(config)#interface fastethernet 0/2 (select the Ethernet 0 of port 2)
SwitchA(config-if)#switchport access vlan 3 (allot the membership of vlan 3)
SwitchA(config-if)#exit (exit from interface 2)