What is The difference between a movie clip and a graphic?

The difference between the two is simply a matter of behavior or rather how treats the two objects.

You can use both a graphic symbol and movie clip symbol to create an animation. But only movie clips can have instance names. This means that only movie clips instances can be uniquely identified using actionscript. The instances can then be modified dynamically at run time. This means that when the movie is compiled a copy is created from the library and transformed for the animation. The instance (copy) can be blurred, skewed, shrunk or made partially invisible all during runtime.This cuts down on the computer memory needed to render the animation and keeps the swf file size small.

It should be noted that both graphic and mc can contain animations.

car running without wheels turning or car running with wheels turning with mc's but with a graphic animation all the moving elements must be animated in one timeline and so cannot be controlled independently or load independently making it less dynamic with respect to the methods that can be used to control it.