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Classes and packages – what's the difference?

Here is a simple question with a little background. My company just started using LaTeX for our documents, and there has been some debate/confusion as to the difference between a .cls file and a .sty file, since it appears that global commands will when placed in either file.

Currently, we use the .cls file for all the \gdef's and \newcommand's and things of that nature; while the .sty file is used for all things relating to the document as a whole such as the \usepackage commands and defining colors, etc.

Is this the way they were intended or are we missing something?

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