The two are often confused. Prepared horseradish is the kind you see in the jar on the store shelves. ((The absolute BEST being Atomic Extra Hot!!)) It's made from grated horseradish that is mixed with vinegar, salt and other flavorings. Horseradish sauce is made using prepared horseradish, and is usually what you see along side prime rib or roast beef. Horseradish sauce is typically made by mixing prepared horseradish with sour cream and/or mayo, giving it that creamy consistency.