What is the difference between a CDO and a CDS?

Answer 1

CDOs assemble an entire portfolio of credit risk exposures, segment that exposure into tranches with unique risk/return/maturity profiles, which are then transfered or sold to investors. A CDO's reference (underlying) portfolio can be assembled with physical cash flow assets such as bonds, loans, MBS, ABS etc., or with synthetic credit risk exposures: synthetic CDOs are backed by a portfolio of credit default swaps (CDS).

alternatively:

CDSs are swap contracst and agreements in which the protection buyer of the CDS makes a series of payments (often referred to as the CDS "fee" or "spread") to the protection seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) experiences a credit event. It is a form of reverse trading.