Media items are the original copy of the photos and videos you upload to Later. While posts are scheduled media items that are optimized for a specific social profile.
When you create a post from a media item, the media notes are copied over into the caption field. The notes can then be edited directly from the post without updating the notes in the media item and vice versa. Also, you can add a crop to schedule an optimized version of the original photo.
This helps you optimize your media for other social profiles, by allowing you to schedule one media item multiple times without having to re-upload the original photo or video.
Only posts are counted towards your post count, media item do not so upload unlimited media into Later.
Here’s a chart that outlines the differences: