Difference between Saturated Liquid and Saturated Steam

This is a late answer, but I see that no one has mentioned the true physical processes at work here, and so it's worth an update. Look at the Pressure/Internal-Energy (bar vs kj/kg) diagram for steam: https://www.mathworks.com/matlabcentral/fileexchange/9817-x-steam-thermodynamic-properties-of-water-and-steam . There, you can see that "at saturation conditions," which involve all states at the same temperature and pressure, there is a continuous change of thermodynamic state, identified by the property called "quality." Zero quality contains all vapor (gas) and 100% quality involve all liquid. There is a continuum between. Thus, at the same temperature and pressure throughout, there are an infinite number of well defined states, with each having a different quality, or amount of internal energy.

With this knowledge, the answer to the question is that "steam" is in general a mixture of two phases of water, a vapor or gas phase and a liquid phase. At one extreme there is only gas, and at the other, only liquid. Thus, the questions isn't properly posed because of its confusion of "steam" with "vapor." The best answer is thus, the physical difference between the "steam" state and the "liquid" state is that the "steam" state in general contains both vapor and liquid and the "liquid" state contains only liquid. The physical difference between the vapor state and the liquid state is simply the difference between a gas and a liquid. Yes, the vapor state of water is a true gaseous state.

From "Thermodynamics: an engineering approach", by Yunus A. Çengel, Michael A. Boles:

Consider a piston–cylinder device containing liquid water at 20°C and 1 atm pressure being heated. Under these conditions, water exists in the liquid phase, and it is called a compressed liquid, meaning that it is not about to vaporize.

As more heat is transferred, the temperature keeps rising until it reaches 100°C. At this point water is still a liquid, but any heat addition will cause some of the liquid to vaporize. A liquid that is about to vaporize is called a saturated liquid.

Once boiling starts, the temperature stops rising until the liquid is completely vaporized. Any heat loss from this vapor will cause some of the vapor to condense. A vapor that is about to condense is called a saturated vapor.

If the temperature of the vapor is, let us say, 300°C; and if we transfer some heat from the vapor, the temperature may drop somewhat but no condensation will take place as long as the temperature remains above 100°C (for P = 1 atm). A vapor that is not about to condense (i.e., not a saturated vapor) is called a superheated vapor.

this is incredibly late, but for people still googling this question: I understand it as Hg being the vapour state with almost 0 liquid state. The quality x of this would 1. And the saturated liquid state is where the liquid is on the cusp of changing state, thus an infinitesimal amount of the liquid has vaporised, with a subsequent quality x would be 0. Denote saturated liquid state as Hf.

The difference is just that: one is in the liquid phase and the other is in the vapor phase.

A material like water has a certain temperature at which it boils. This temperature changes with ambient pressure, such that a low pressure corresponds to a low boiling point temperature and a high pressure increases the boiling point temperature.

When a saturation condition is reached, the liquid phase and the vapor phase are in equilibrium with one another, i.e., both phases can exist simultaneously. If a small amount of energy is added to saturated liquid, it turns into vapor at constant temperature. Likewise, if a small amount of energy is removed from saturated vapor, it will condense to liquid at const. temp.