Ok folks, grab your coffee and settle back...I'm going to enter almost entirely into the realm of opinion, and personal interpretation.
What is the difference between illustration and entertainment design?
Yeah, I'm feeling sassy this morning, so let's do it :) I see a LOT of confusion on this topic, and a fair number of different opinions even among people who work professionally. In most art schools they are taught together, and often they look very similar to each other.
This is a beautiful illustration done by my friend Tommy Arnold.
This is concept art for Captain America: Civil War done by Andy Park.
I can see how you could be confused. It's not always easy to see the difference!
Made for the consumer
This is a big one. The consumer of a book cover is the book reader.
Artistic decisions don't affect the final product
How an artist paints a book cover doesn't impact the book at all. In some senses, as long as it is appealing, it doesn't really matter what choices are made.
Created for enjoyment
An illustration is made to be looked at for the pleasure of looking at it. It's "good" if people like it. This applies to book covers, interior art, comics...if you enjoyed seeing it, it's a success!
Made for the team
The consumer of your concept art is another artist, be it a modeler, storyboard artist, animator or the director of the film.
Artistic decisions affect the final product
Huge one. Your choices inform the rest of the process down-stream, in fact, that is the entire purpose of your work.
Created to inform
Concept art doesn't have to be pretty, or finished looking, or appealing. It has to solve a visual problem. As time has gone by and tools have improved, in general artists have found that the more appealing their work, the more likely it is to be approved, but that's not the point. If it solved the problem, and told the next girl in the pipeline what she had to do, it was "good."
Subsets of Entertainment Design/Concept Art
This is the area that people have the least trouble separating from illustration. You're creating the stuff that characters interact with.
You are making the inhabitants of the world. The only reason to put them in poses and give them expressions is to test that their designs "work" in the story....otherwise, they could all be in T-poses with a turnaround.
Character designers don't just draw "cool people", they are problem solvers. They are working out how each element of the character will interact with the others, the environments, other characters and the story. If you think of all the different animation styles, video game styles, and even live action film styles, you begin to understand the range of character design.
The locations! My video game friends call them "environments", in animation they are often called "backgrounds", and in film "sets", but it's the same thing. You are creating something to tell the actual builders what to make. The only reasons to put characters in these is to show scale, or to make sure that the colours/shapes won't clash badly with the character designs. Same with lighting - they don't have to be dynamic except to prove that making them dynamic doesn't break the composition of the story.
Just like characters, it's not enough to draw a cool place, you have to make sure it solves the needs of the project.
Which brings us to the most confusing type of design painting - the keyframe. A keyframe painting is part of the "big picture" design - to give the whole team, particularly the management, an idea of what the final product could look like. It is *almost* an illustration, because it focuses more on mood and storytelling than actual buildable features. It is essentially "mood design" and is given to the rest of the team so they know the broad strokes of the design language behind their characters and environments.
Sometimes, keyframes are almost "nicely painted" versions of storyboard panels made midway through the film, and sometimes they are done long before there is even a script (This was how Star Wars Ep1-3 was made.) I say 'film', but they exist for video games and animations as well.
Because of the rise of art books, keyframes have gotten a much greater spotlight than they typically get in an actual production. They are usually pretty to look at and enjoyable, so they go well in "Art of" publications...and those books have skewed the general public's sense of what concept art means.
I hope this has been helpful (or at least interesting) to understanding how this work is thought about in the industry. Thanks for reading!