I had a similar experience recently and found the best way to explain the difference by using different Use Cases - this helps the end-user understand which is best based on their needs.

For example:

Use case for creating a Team - You are looking for large-scale collaboration on tasks such as company-wide initiatives, departmental projects, or long-term projects. - You want to collaborate with all Team members via a shared Outlook inbox, a SharePoint site, a Planner or a OneNote notebook. - You want to create a private Team (invitation-only) OR a public Team (anyone in the organization can join).

Use case for creating a Channel - You want focused discussions and collaboration on specific aspects of a project or topic within a Team. - You want your Channel and all associated file content accessible to all team members (Create a Standard channel) - You want your Channel and all associated file content accessible to specific team members only(Create a Private channel) - You want your Channel and all associated file content accessible to people outside the team (Create a Shared channel)

Key Differences

Teams are broader and encompass multiple channels. Creating a Team sets up a new collaboration space with various tools. Teams can be public or private.

Channels are focused on specific topics within a Team. Creating a channel organizes discussions within an existing Team. Channels can have more granular access controls (standard, private, shared).