The agile community has written much about this in the past year or so: Iterative vs Incremental - from the first (and original) Wiki Web The Neglected Practice of Iteratation - by Jeff Patton Difference between Iterative and Incremental Development
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Read the complete post at http://feeds.feedburner.com/~r/bradapp/~3/328104930/iterative-and-incremental-redefined.html