The functional difference is that when you insert something with "Paste" you
get pretty much whatever formatting was with the text at the point where you
copied or cut it. including website formatting or even styles in Word
documents. This may be OK in many situations but a problem in others. For
example, if you want to insert text into a document, this may create some
havoc with your formatting.
Do this with "Paste Special" and you can paste the incoming stuff and have
some options about formatting. One option which is particularly useful for
text is the option for inserting text as Unformatted. This means that the
incoming text will lose whatever formatting it was carrying and adopts
whatever formatting you have in effect at the insertion point.
Could Microsoft have combined both into one? Of course. Should they have
done so? Well, who can say?
