Basically both paneer butter masala and paneer makhani are made in the same way. Spiced tomato gravy is sauteed in butter to which you add paneer cubes. However paneer butter masala has a sweet taste due to the use of onions and sugar. Paneer makhani has more sharp flavor and taste as we don't use onions in this. Moreover fresh cream is optional in paneer makhani but used in butter paneer masala. Both these dishes are derivatives from butter chicken recipe. In the vegetarian variation paneer cubes are used instead of meat.