I recently ran smack dab into a great explanation (complete with photos!) of the differences between intarsia and fair isle knitting. Maggie’s Rags offers this here:
http://www.maggiesrags.com/tips_color.htm
An example of Fair Isle or stranded knitting can be seen is this pretty Seashore Sweater.
While, Intarsia is represented in this Night Sky sweater.
Check out all of the ins, outs, rules and variations, at Maggie’s Rags!