Hand-knotted and hand-woven rugs are both made by hand, however, they each employ a unique weaving technique that affects their quality, texture, design complexity and price. (There are other rugs that claim to be “hand-made,” such as “hand-tufted,” but this is a marketing tactic and not an authentic hand-made technique.)
Hand-knotted rugs are almost always more expensive than hand-woven, as their production process is longer and more complex. They have finer details, are made of better wool (it's length must allow for pile and excess to clip off) and require more skilled artisans. Both are good rugs, but which one is ‘better’ depends on how it will be used and personal preference.
A weaver in Pakistan making a hand-knotted rug.
Hand-knotted rugs are thousands or millions of knots individually tied to a foundation. The rugs are “raw” after the knotting is finished and must be shaved down to get this finished, detailed look. They have a distinct back and a front; the front is the plush and detailed side shown here.
Hand-woven rugs are often referred to as “flatweaves” because they’re, well, flat. They are woven more like a basket, which means the front and the back look the same, making the rug reversible. They have no pile or actual “knots.”