There are two easy facts to differentiate between hail and sleet: time of year and size. Using these essentials, it is easy to identify what kind of frozen precipitation is falling.
This picture of a record-sized hail ball is courtesy of NOAA.
Hail occurs during severe weather. Hail is the formed when an object, including dust or particles in the air, collides with supercooled water. As the water freezes around the object, it begins to form an ice pellet. To understand this, you have to remember that warm air rises and cool air sinks (the same as heating or cooling in your house) this is because colder air is more dense than warmer air. Normally, warm air is very buoyant in the clouds that are associated with thunderstorms. This buoyancy causes these clouds to rise higher into the atmosphere past the freezing level.
The length of time the ice pellet stays in the cloud is a representation of how large it will be when it falls to the ground. How does it increase in size? Inside the cloud, there are a series of updrafts. The pellet will continue to be tossed up and down, adding layers of ice, until it becomes too heavy for the updraft. When the hail becomes too heavy, it then falls to the ground. Usually accompanying severe thunderstorms, hail can be a variety of sizes, many times correlating with the intensity of the thunderstorms. Certain hail can get as large as golf balls, softballs or even larger! The largest hailstone ever found was in Vivian, S.D., it weighed 1.9 pounds and measured 8 inches in diameter with an 18.5-inch circumference.
Sleet occurs during winter weather and is a type of winter precipitation. All precipitation falls out of a cloud as snow. In certain instances, in the winter, the snowflake will go through a warmer layer and begin to melt. As it continues to fall, it will then proceed through a colder layer and freeze into an ice pellet or ball, very similar to hail. Unlike hail, the pellet only "falls" once and is generally very tiny in size.