What's the difference between (UDP and TCP)/IP?

Why to prefer using one over another?

UDP and TCP both sit on top of IP. The main difference is that UDP is not reliable, i.e. it has no mechanism for error recovery, built into the protocol, whereas TCP does. The second main difference is that TCP is a windowing protocol whereas UDP isn't.

The main reason for choosing TCP is where you need your data to be sent with guarentee's to the application that it will get through. With UDP if a packet fails to get through it is up to the application to recognise it and correct the situation. The price you pay is that error recovery requires overheads, so TCP is less bandwidth efficient than UDP and requires more memory per session on ends hosts. Like any engineering solution its a trade off.

An example that says it all - File Transfer Protocol runs over TCP and is designed to transmit large files over long distances (in a networking sense)

'Trivial' File Transfer Protocol runs over UDP and is designed to transfer small files over short distances, where a failure is easily manually rectified.

This is not quite true. Due to its lack of overhead UDP is slightly faster in conditions where the end to end latency is small compared to the packet transmission time.

Due to its lack of windowing, where end to latency is greater than packet transmission time, UDP is unable to fill the time gaps and therefore rapidly becomes less efficient than TCP.

UDP is the protocol for gaming, cause you don't want to go back retrieving packets when the gameplay has moved past that point.

Correct, the same reason that it's the protocol used for VOIP. Theres no point in recovering packets when they become useless after 150mS and would dumped by the codec anyway.