The principal diference is the instruments used. Regarding the instruments that we use to extract grafts in the donor site, we customized our punch according to the patient's hair characteristics. We have different tools with varied punches and we used them according to the donor caracteristics.
A graft has a different number of hairs. You can have 1, 2, 3 or 4 hairs in one graft. Each graft has a different diameter. That's why we customize our punch according to patient's hairs characteristics.
We are choosing a punch a little bit bigger than the graft we take so we make sure to get it entirely. With big punches, you will have a larger amout of hairs. In fact, for the same amount of grafts, you will displace more hairs, therefore more volume, therefore better coverage.
What about the scarring? Scar depends on everyone skin characteristics more than in punch size. The skin is elastic; after extraction those holes will shrink and it minimizes the scar size. This is a natural function of our body. You have tiny differences that could not be visible to a naked eye.
We must agree that any cut of your skin will end with some kind of scarring. The smaller the aggression, the better the scar. So, small punchs should definitely give less scar tissue. However, what we are looking at in hair transplant surgery is the non visibility to a naked eye of the scar.
Two things make the scar visible: its size and the hypopigmentation. The second one is far more important than the first. Because it creates more contrast with the surrounding skin. Hypo pigmentation or white scar is due to inflammatory cells that destroy the melanocytes and it depends a lot on skin characteristics and individual tendency to react to a trauma.
Here an interesting link Dr. Cole wrote recently:
Size Comparison Hair Transplant Study
http://www.forhair.com/hairtransplant/topic1455.html?highlight=fue