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Both will delay the speed of execution.

Thread.sleep () :  It will stop the current (java) thread for the specified period of time.  Its done only once

It takes a single argument in integer format

Ex: thread.sleep(2000)- It will wait for 2 seconds

It waits only once at the command given at sleep

SetSpeed () :  For specific amount of time it will stop the execution for every selenium command.

It takes a single argument in integer format

Ex: selenium.setSpeed(“2000”)- It will wait for 2 seconds

Runs each command  after setSpeed delay by the number of milliseconds mentioned in set Speed

This command is useful for  demonstration purpose or if you are using a slow web application

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