These diseases tend to be differentiated based on age of onset and ability to produce insulin.
The Type 1 diabetic tends to not have reached adulthood by the time the diagnosis is made. This form of the disease comes about as the result of the destruction of beta cells in the pancreas. This problem is independent of the person's previous diet or other health habits. When these cells are destroyed, insulin production stops, and the body cannot use the sugar in the blood. The cells will actually see a deficit in sugar because they cannot respond to its presence without insulin. As a result, other forms of fuel, like fats and proteins, are broken down, creating ketoacidosis. The primary intervention here is to inject insulin to make up for the deficit. Also, diet needs to be controlled extremely well because of the body's lack of ability to respond.
In type 2 diabetes, the person tends to be diagnosed much later in age, and it is associated with the person's diet and exercise habits. The problem here is not with the pancreas. Instead, we see that there is "insulin resistance." The person needs a greater amount of insulin pumped out by the pancreas to have cells be able to take in glucose and process it. So, in type 2, there is a normal or greater amount of insulin in the blood in response to eating, in contrast to type 1, where there is a minimal amount. The primary interventions here are to change the person's diet and encourage him or her to exercise. If this intervention fails, medications like metformin can be prescribed to allow tissues to be more able to respond to insulin. Of course, over time the beta cells become exhausted so the diabetic may begin to require insulin later in the disease.
I hope that helps!