Their differences are political. Sunnis believe that the four Caliphs following Muhammad's death were rightfully elected via the traditional Arab voting system. Shi'ites believe that Ali (Muhammad's son-in-law) should have been the successor to Muhammad after his death.
Wiki says the following: Differences of Shia and Sunni traditions HADITH: Because Islamic law is based partly on the hadith (traditions or customs of Mohammad), Shia rejection of some Sunni hadith and Sunni rejection of some Shia hadith means that the versions of the law differ somewhat. For example, while both Shia and Sunni pray five times each day, some of the prayer times differ. Shia pray the As'r and Ish'a because its likely to be done like that and it can be prayed as the Sunni do, and therefore, they are prayed together with the Zuhur and Maghrib prayers, respectively. Shia do not perform non-obligatory prayers in congregation, like Tar'raweeh, which Sunnis pray during Ramadaan. MUTA/MUT`AH: Another issue of difference between the sects is that of Nikah Mut‘ah or "temporary marriage". While the Sunni claim that Mut`ah is forbidden, Shia accept it because it is found in a number of Shia traditions that the practice is permitted. There are Sahih Shia traditions which maintain that mut'ah is forbidden, but these are dismissed as they contradict other narrations on mut'ah which were deemed more acceptable.[8] Many Shia discourage the practice of Mut'ah, but maintain that it is permissible. MOHR: Another difference is that some Shia use soil (turbah) or clay tablets (mohr) during their prayers. Search/see: "turbah". http://en.wikipedia.org/wiki/Shi'a_Islam#Differences_of_Shia_and_Sunni_traditions
