A light-emitting diode or an LED is a small semi-conductor chip often less than one millimeter square located in the centre of the bulb.

Just as you would run a current through a filament in an incandescent light bulb, you can run current through a semi-conductor chip, and it emits light in the visible spectrum. The chip has two regions separated by a junction. The p region is dominated by positive electric charges, and the n region is dominated by negative electric charges. The junction acts as a barrier to the flow of electrons between the p and the n regions.

Only when sufficient voltage is applied to the semi-conductor chip, can the current flow, and the electrons cross the junction into the p region. In other words when the diode is forward biased (switched on), electrons are able to recombine with holes and energy is released in the form of light. This effect is called electroluminescence and the colour of the light is determined by the energy gap of the semiconductor.

In the absence of a large enough electric potential difference (voltage) across the LED leads, the junction presents an electric potential barrier to the flow of electrons. This very small chip with a lead frame package that supports the wires and holds the chip in place is the substrate of an LED. It’s typically a little piece of metal with a lead coming off of it and another piece of metal with a wire that connects to the other side of the LED. That whole thing gets encapsulated in an epoxy or clear silicon. That individual package is called an LED, and it’s essentially a miniature light bulb.
 
What is the difference?
When you pass current through the LED, it doesn’t get hot like a filament in an incandescent light bulb gets hot. An LED produces light through a completely different physical process. It’s an electronic process essentially. Here the chip itself isn’t getting white hot, it’s simply producing light directly from the current that’s passing through it. The whole thing gets encapsulated into that epoxy, and there’s no air gap inside it. If you look at an LED, there’s usually a little dome or lens of some sort as part of that package, but the whole thing is solid. That’s where we get the term solid-state lighting.

Most of the time we cluster that individual LED with other similar LEDs on a circuit board, and that package is called an LED array. To power the array, we need an electronic driver. The electricity can come straight from your standard wall jack, and the electronic driver conditions the 120V AC electrical power and sends it to the LED array in a form that’s appropriate, usually DC. The whole thing — the LED array, the electronic driver and any reflectors or lenses that are added to provide a very specific light distribution — gets put into some sort of housing that brings everything together. 

What Causes the LED to Emit Light and What Determines the Colour of the Light?
When sufficient voltage is applied to the chip across the leads of the LED, electrons can move easily in only one direction across the junction between the p and n regions. In the p region there are many more positive than negative charges. In the n region the electrons are more numerous than the positive electric charges.

When a voltage is applied and the current starts to flow, electrons in the n region have sufficient energy to move across the junction into the p region. Once in the p region the electrons are immediately attracted to the positive charges due to the mutual Coulomb forces of attraction between opposite electric charges. When an electron moves sufficiently close to a positive charge in the p region, the two charges "re-combine".

Each time an electron recombines with a positive charge, electric potential energy is converted into electromagnetic energy. For each recombination of a negative and a positive charge, a quantum of electromagnetic energy is emitted in the form of a photon of light with a frequency characteristic of the semi-conductor material (usually a combination of the chemical elements gallium, arsenic and phosphorus).

Only photons in a very narrow frequency range can be emitted by any material. LED's that emit different colours are made of different semi-conductor materials, and require different energies to light them.

How Much Energy Does an LED Emit?
The electric energy is proportional to the voltage needed to cause electrons to flow across the p-n junction. The different coloured LEDs emit predominantly light of a single colour.