From http://wiki.answers.com/Q/What_is_the_difference_between_a_computer_process_and_thread:
A single process can have multiple threads that share global data and address space with other threads running in the same process, and therefore can operate on the same data set easily. Processes do not share address space and a different mechanism must be used if they are to share data.
If we consider running a word processing program to be a process, then the auto-save and spell check features that occur in the background are different threads of that process which are all operating on the same data set (your document).
First thing you need to know to understand the difference between a process and a thread, is a fact, that processes do not run, threads do.
So, what is a thread? Closest I can get explaining it is an execution state, as in: a combination of CPU registers, stack, the lot. You can see a proof of that, by breaking in a debugger at any given moment. What do you see? A call stack, a set of registers. That's pretty much it. That's the thread.
Now, then, what is a process. Well, it's a like an abstract "container" entity for running threads. As far as OS is concerned in a first approximation, it's an entity OS allocates some VM to, assigns some system resources to (like file handles, network sockets), &c.
How do they work together? The OS creates a "process" by reserving some resources to it, and starting a "main" thread. That thread then can spawn more threads. Those are the threads in one process. They more or less can share those resources one way or another (say, locking might be needed for them not to spoil the fun for others &c). From there on, OS is normally responsible for maintaining those threads "inside" that VM (detecting and preventing attempts to access memory which doesn't "belong" to that process), providing some type of scheduling those threads, so that they can run "one-after-another-and-not-just-one-all-the-time".
Best Answer
Both processes and threads are independent sequences of execution. The typical difference is that threads (of the same process) run in a shared memory space, while processes run in separate memory spaces.
I'm not sure what "hardware" vs "software" threads you might be referring to. Threads are an operating environment feature, rather than a CPU feature (though the CPU typically has operations that make threads efficient).
Erlang uses the term "process" because it does not expose a shared-memory multiprogramming model. Calling them "threads" would imply that they have shared memory.