A translation memory is a linguistic database that continually captures your translations as you work for future use.
All previous translations are accumulated within the translation memory (in source and target language pairs called translation units) and reused so that you never have to translate the same sentence twice. The more you build up your translation memory, the faster you can translate subsequent translations, enabling you to take on more projects and increase your revenue.
A translation memory tool stores segments of text as translation units (in source and target pairs). A segment can consist of a sentence or paragraph.
A terminology tool, on the other hand, is a searchable database that contains a list of multilingual terms and rules regarding their usage.
Terminology is typically used in conjunction with a translation memory.