Ive got the option of either/or for installing a mod.. whats the difference?

There's very little difference for the mod user, but if for some reason you need to load the plugin later in your load order (due to conflicts, for instance), then choose the .esp version, as all .esm files are loaded before all .esp files.

Is it White Wolf of Lokken Mountain you're installing? That's the only mod I know of which gives you the option of esp or esm. When I asked on their forum which one I should use, they recommended the esm version.

I don't think it really matters much--just make sure you don't install both.

First, I would suggest taking another look at the readme for the mod, to see if that offers any guidance. If the modder went to the trouble of releasing two different versions, they should have provided information to help decide which version to use.

Second, also double check the readme to make sure you're really only supposed to install one of the files. I know I've used a few mods that needed both an .esm file and an .esp file installed to work correctly. Also, some mods only require the .esm file; the .esp is just a way to add/modify some features and can't be used without the .esm file.

Finally, when asking for help you've got a much better chance of a good answer if you include necessary nformation: i.e, the name of the mod you're asking about. Without that, all anybody can do is make guesses, because the answer to your question depends on what mod you're asking about (and why the modder provided both an .esm and an .esp).

(Note: when asking for help with a mod, putting the name of the mod in the subject of your post gives you a much better chance of catching the eye of someone who's familiar with the mod you want help with.)

Taking into account what the other posters have said, I think you'll find the difference is not quite as apparent when you're playing the plugin so much as if your're modding the plugin. In that case, I believe the .esp is far more preferable to use as the basis for modifying references and such.

.esms are cool and make people feel special.
Also most big mods with lots of resources use them.
.esps are for the lame kids with acne and no friends
Tweaks and small mods use them.