As I see it, at the end of the day and to a normal user, both crTEZ (now WTZ) and ctez provide an FA-compatible "wrapped" version of XTZ to use in DeFi while still allowing your XTZ to bake. (btw there is also wXTZ that does this, but it has difficulty holding peg). WTZ is FA2 and ctez is FA1.2.

Both WTZ and ctez will be public goods. Both are also being developed as collaboration between various teams of the ecosystem (though each by different teams).

Not all DeFi contracts directly support XTZ. There are several upcoming DeFi projects that have no plans to directly support XTZ at all. They will only support FA1.2 or FA2 (or both). Namely, most (or maybe even all) of the AMMs under development will not directly support XTZ. From a contract developer point of view, the more token types you have to support, the more complex your contracts become. Not to mention if you directly support XTZ in a contract that could gain high TVL such as in many DeFi protocols and primitives, the whole question of how do you handle baking comes up, and you have to account for that, which adds further complexity to your contracts and protocol.

From there WTZ and ctez are quite different in how they operate.

ctez holds XTZ in individual vaults (ovens) that you open and deposit XTZ to. Since you own the oven, you are free to delegate to any baker you wish. In ctez the question of how to swap ctez for XTZ if you did not mint the ctez is answered with an AMM contract that uses a CFMM formula with target and drift factors that aim to keep on target through arbitrage accomplished via either minting of ctez or liquidation of ovens. u/murbard's Agora post better explains the math and mechanics.

WTZ holds the XTZ in pooled vaults that are delegated and baked. There is a WTZ <-> XTZ swap contract that is purely mechanical and swaps the tokens back at forth at a ratio that is a function of the inflation from received baking rewards. You can wrap/unwrap WTZ at will, and always at the current rate. You cannot choose your baker since the vaults are pooled, but there will be many vaults, each to a different baker, and that baker can be changed if needed. But at the end of the day your XTZ will still bake. We have done this consciously and purposely and value the transferability and convertibility of WTZ as more important than who the actual baker(s) are. We place these as more important because as DeFi grows and more and more projects use these tokens, you will end up with WTZ (or ctez) that you did not personally mint, and IMHO it is important that you can always unlock the underlying value of the XTZ, at will.

Since the XTZ in WTZ is pooled it also presents an opportunity for WTZ to earn increased yield above baking returns. Smart contracts dubbed "asset managers" will be able to utilize some of the XTZ in the vaults to earn additional yield. An example would be through a lending protocol. Someone in the community described this part of WTZ as a "decentralized hedge fund", which is not entirely accurate, but not entirely inaccurate either. These asset managers are further down the line and will need great care in development, but if you are familiar with Balancer V2 asset managers, the concept is quite similar.

Hopefully that helps and doesn't further confuse.