A software wallet stores your private keys on an internet-connected device such as a phone or computer. A hardware wallet stores them on a dedicated physical device that signs transactions offline.
Because a hardware wallet's keys never leave the device, malware on your computer cannot steal them even if you visit a compromised site. Software wallets are always exposed to whatever runs on the host device.
Software wallets are fine for small amounts and daily spending, and they are more convenient. They are also the gateway to most DeFi apps.
Use a software wallet for everyday transactions and small balances, and keep your long-term holdings on a hardware wallet. This combines convenience with real security.
If your holdings are meaningful, a hardware wallet is the single best upgrade you can make.