There are subtle differences between the two. Though their names are sometimes used interchangeably. An application letter is often intended to stand on its own, whereas a cover letter generally can't be the applicant's only document submitted to express interest in a job opening. A cover letter as the name suggests is just a cover. It introduces you and that is all. It needs to be accompanied by a resume or a CV.
Cover letters typically contain a brief introduction. The introduction for a cover letter consists of three to four sentences about the job seeker's work experiences, education, accomplishments and the type of organizations he feels are best suited for his qualifications. On the other hand, an application letter might contain a more extensive introduction simply because this letter serves a purpose that's similar to the resume as well as an introduction. An application letter generally also contains a brief description of the job seeker's work history or professional experience, which a cover letter does not include.