As more and more airlines form partnerships with other airlines to get a competitive edge and expand the destinations from which they can attract passengers, it is important for consumers to have an understanding of the various types of airline partnerships.
Interlining is the most basic type of inter-airline cooperation. It involves a single reservation and a single ticket for connecting flights on different partner airlines. Passengers also do not have to pick-up and recheck bags at their connecting airport. This is especially helpful in case of delayed incoming flights at the connecting airport as the ticket-issuing airline is responsible for providing the connecting flight. Also, passengers do not have to pay checked luggage fees to several airlines for each leg of their flight.
Codesharing, in which an airline puts its code on the flight of its codesharing partner airline, includes interlining with some additional features. Codesharing offers better luggage and flight transfer procedures, better complaint redressal in case of delays as well as possible lounge access and better frequent-flier miles/status benefits.
Read more on this topic here:
How interlining & codeshares matter to your flights