What is the difference between a Windows system image (generated using Control Panel -> Backup and Restore -> Create a System Image) created in Windows 7 SP1, versus creating a clone using a tool like Clonezilla?
Both cloning and imaging create an exact record of your drive or partition.
When you clone a drive you create an exact copy of it onto another drive, so the two become identical. Imaging on the other hand copies all the information you have stored on the drive into a single, compressed, but still relatively large file.
Each of these are suitable for a different purpose too. For instance, if you want to make a backup of your data system image will suite better, while cloning is used mainly for transferring the whole OS to another internal drive and after that replacing the old with the new drive.