gdgt

Noise reduction is a post-processing feature. This means that the image data has already been taken by the camera. The software in the camera then goes in and looks to see if there is grain/noise that it can try to smooth out or remove from the image. Usually this involves some loss of detail and sharpness in the picture.

Image stabilization happens in real time and physically forces the camera to be more still, allowing for much clearer images to be taken. Because it stabilizes the camera, you get sharper images and less blur from hand movements. If you are capturing images in low light, you still will have noise but the overall quality of the picture is better from the start.

I hope this was a clear explanation. I can always go into further detail if you'd like.