Posted too soon - found an explanation using Google
http://groups.google.co.uk/groups?q=...ing.net&rnum=2
(Mark S. Bilk)
Pasted below
Two basic principles: Electrical signals are always sent
using two conductors, because voltage is only meaningful as
the voltage difference between two points. When current
flows through a conductor, it causes a voltage difference
to appear between the two ends; this can be minimized by
using a large (wide and thick cross-section) conductor.
Most electrical connections on a circuit board or in a cable
use a single conductor -- wire, coax, or printed foil -- to
carry each signal, and a ground conductor, or series of them,
to establish a zero-voltage reference between the circuits
sending and receiving the signals. Since the receiver re-
sponds to the voltage difference between the signal and ground
conductors, and the ground is common to all the various signals
being sent, the ground conductor has to be large and very well
bonded at both ends in order to prevent reference voltage
fluctuations between source and destination, because the
ground conductor also carries signal currents -- from all the
signals. Fluctuations between the ground voltage of sender
and receiver (caused by signal currents flowing in the ground
conductor) would cause errors in the received signal.
Differential transmission uses a separate pair of conductors
to carry each signal; if the voltage of one is changed by the
transmitter circuit in a positive direction, the voltage of
the other is changed equally in a negative direction. The
receiving circut senses the difference in voltage between the
two signal conductors, rather than between one signal conduc-
tor and a common ground connection. So each signal is sent
and received independently of all the others, instead of
sharing the reference (ground) conductor.
Although a ground conductor is still used, it carries much
less signal current than it does in the single-ended (non-
differential) method, and so can more easily maintain a
consistent ground voltage between the two ends. However,
since the ground is not used as a signal reference, this con-
sistency is much less important in the differential system.
Interactions between signals (which could cause reception
errors) are much smaller with differential transmission for
three reasons -- first, the electric and magnetic fields of
the two equal and opposite signals in each pair tend to cancel
each other out in their effect on neighboring signal pairs;
second, any remaining effects on neighboring conductors tend
to be in the same direction in both wires of the affected
pair, and so get ignored by its receiver, which only responds
to changes in opposite directions between the two wires;
finally, there is no interaction between signals in the ground
conductor, because it doesn't carry signals, and is not used
as a reference by the receivers.
Since signal interactions and consequent reception errors
increase with signal frequency, and the interactions are much
smaller with the differential system, it can carry signals at
a higher frequency, and thus higher data rate, without errors.
It's disadvantage is higher cost due to more complex sender
and receiver circuits, and sometimes more cable conductors and
connector pins.
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