What's the difference between an ASIC and an FPGA? Which is better for mining?

I co-founded LargeCoin, Inc., and we really are developing an ASIC for Bitcoin mining. As earlier replies pointed out, the unit cost of ASICs is far lower than FPGAs once you get beyond a few hundred units. The up-front cost of ASIC production varies widely depending on the process you use. On the cheap side, there is so-called "wafer sharing," where your design gets populated on to a wafer with many other designs. Wafer sharing typically uses very old processes that aren't going to deliver the power and density benefits of newer processes. BTW, a "process" refers to a the physical process for making the transistors within the ASIC. Generally a process is referred to by its transistor geometry size - for instance 45nm is a relatively current process. Next up is "Structured ASICs". A structured ASIC vendor provides an assortment of standard logic components on the bottom layers of the chip. You then add a few metal layers on top of these connecting up the basic components to implement your custom logic. Structured ASICs cost between $100,000 and $500,000 (very approximately) for the first prototypes. Then there are "standard cell" ASICs, where the chip is designed using standard components that are sort of analogous to software libraries. And finally, there is "full custom". With a fully custom chip, you are designing everything about the ASIC yourself. The NRE costs for a full custom design is in the millions of dollars typically - particularly if you want to use a modern process. What process are we using? We're keeping that close to our chest at the moment. However, I can confirm that our detailed modelling at this point indicates we'll be able to mine 250 GHash/s in a single rack of mining units using 5kW of power. When you consider that this represents the computational power of about 400 AMD Radeon 6990 GPUs (which would consume close to 200 kW), you can immediately see the benefit of ASICs for Bitcoin mining. By the middle of 2012, ASIC mining will be a substantial factor in the Bitcoin economy.

Apart from what @David Schwartz said, a FPGA can be reprogramed in seconds to minutes, where as an ASIC takes weeks to months to build a new version.