Directories have categories, they are usually run by individuals or a small team and sites are either submitted by people, or added by the owner/editor or a combination of both.
Directories use 'human intelligence' to decide which sites will 'reside' in their index. They also use human categorization. Search engines on the other hand will use automated crawlers to index websites.
Just to add to Pipes & Jitendraag, users can also search for what they are looking for by drilling down manually through categories and subcategories or the directory may have a search function for keyword use, or both.