A motel is one that you use whilst driving, originally a 'motor hotel' and was meant to be used by travellers, usually for one or two nights. A hotel is generally situated in the middle of town and meant for longer stays possibly whilst on holiday.
Motels are meant to accommodate people who arrive by car, so there is a parking space for each room, usually right outside the door of the room or at least nearby. The doors to the rooms open to the outdoors. In hotels, you enter the building through a lobby, and the room doors open onto corridors inside the building. Price has nothing to do with what the place is called, though generally motels are cheaper since they cater to people who are just passing through and don't offer the same facilities as hotels which often include pools, restaurants, room service, laundry service, and large rooms for gatherings.
Motels are usually cheaper, smaller, only one or two stories, and aren't in a chain. So "The Mom and Pop Inn", for example is a motel. "The Holiday Inn" is a Hotel. It is rated (like a four star hotel) it's big, it's well known, they serve breakfast, they have maids, etc. You get the idea!
Whether a motel is of the typical courtyard variety or a building that looks like any hotel, the key difference is that a motel will have a parking space for each one of its rooms. Hotels typically have far fewer.
Motel is short for motor hotel. The difference between the two, is that you can drive directly to your door at a motel. At a hotel, you must enter the building to access your room door. Some motels now have two of more floors, but the doors are still on the outside of the building. Definitions:
http://dictionary.reference.com/browse/hotel
http://dictionary.reference.com/browse/motel
So, you see, the difference is in the parking arrangement. Motels were developed to accomodate the increase in travel by car.
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