A team is a collection of people, conversations, files, and tools – all in one place. Teams are made up of channels, which are the conversations you have with your teammates. Each channel is dedicated to a department, project, or topic.
Channels are where the work actually gets done - where text, audio, and video conversations open to the whole team happen, where files are shared, and where apps are added.
While channel conversations are public, chats are just between you and someone else (or a group of people). Think of them like instant messages in Skype for Business or other messaging apps.