In Active Directory, a domain is a logical group of network objects, such as users, computers, and resources, that share a common security policy and can access one another's resources. A forest, on the other hand, is a collection of one or more domains that share a common schema, configuration, and global catalog. Domains within a forest are connected through trust relationships that allow users to access resources across different domains. Essentially, a domain is like a department of an organization, while a forest is the entire organization with multiple departments (domains).