The fundamental difference lies in the type of cabling and optical transceivers. SX transceivers utilize lower-powered, lower-cost optics and lower-cost, shorter-distance MMF cabling while LX utilizes higher-powered, more accurate optics for longer distance with more expensive SMF cabling.
Keep in mind that when you introduce a mode conditioner or mode conversion device, you will introduce additional degradation into the optical signal (e.g. db loss). SX and MMF should enable distances depending on speed (e.g. 1Gbit, 2Gbit, 4Gbit, 10Gbit) of the interface to a couple of hundred meters (actual distance will vary with speed). Using SMF and LX transceivers and depending upon optical cabling, repeaters and other technology including CWDM, WDM and DWDM distances of 10s to 100s of kilometers can be supported. Avoid simply looking at distance and attainable bandwidth supported and also look at effective latency and effective bandwidth over the supported distance.
This was first published in September 2005