Combination:
Choose two out of three different colors of paints a color
Answer: 3x2/2 = 3 different colors
If the colors are a, b and c, the different combinations are:
ab = ba
ac = ca
bc= cb.
Permutation
Choose two out of three rectangular pieces of fabrics,each of different solid colors, to make flags with horizontal colors.
3x2 = 6.
If the colors are a, b, c the permutations are
ab
ba (they are different because the fabrics are in different positions)
ac
ca
bc
cb
Total: 6 different flags with two colors out of three available.
The first situation is a combination because the order in which you use the colors make no difference. The second one is permutation because the order makes a difference.