Discrete manufacturing describes any system responsible for producing a distinct product. At the end of a discrete manufacturing process, individual products can be distinguished from each other even if they are mostly identical. This type of production is usually separate from process manufacturing.
Process manufacturing takes some kind of raw material and systematically performs some sort of operation on it. For example, oil refineries are process manufacturers because they produce large quantities of refined fuel rather than specific items. Other examples of process manufacturing include the production of concrete, beverages, and paint. In general, materials associated with process manufacturing are relatively fluid. Process manufacturing is also notably asymmetrical; it usually deals with mixtures and reactions that cannot easily be undone.
Discrete manufacturing, by contrast, does not produce a homogenous output. It relies on processes that are more reversible than those of process manufacturing. Most products of discrete manufacturing can be taken apart and returned to their original components; the smallest of these components are probably the result of process manufacturing. The final products of a discrete manufacturing process might all have serial numbers and be sold with individual price tags and bar codes.
Obvious examples of discrete manufacturing include cars, boats, and airplanes. These items all have high individual values and are consequently treated with relatively high individual attention in the process of production. As these products move across assembly lines, their individual units gain more and more value. Lower-value items such as appliances or furniture are still products of discrete manufacturing, however, because they are individually separate.
Some products such as pills or toothpicks blur the line between process and discrete manufacturing. The final products are individually separate, but they are produced in such bulk that functionally they can be treated similarly to "process" goods like liquids. A lava lamp might go through a "process" phase of its production, but eventually becomes a very discrete product.
Ultimately, the difference between discrete and process manufacturing is just a generalization to help understand the different needs associated with the various types of production. This kind of distinction might be helpful for an accountant, engineer, or marketer trying to create processes that apply simultaneously to many different sites of production. Discrete manufacturing is functionally unique because its output can be measured in units rather than volume, individual items can be inspected for quality, and products can be sold by unit rather than incrementally.