Generally speaking the difference between the two is time. A very loose and intentionally imprecise definition of “Pagan” is “Any person not following a monotheistic religion, and self-identifies as a pagan.” However, there are Christo-pagans, that believe in and worship the god of Christianity, but also believes in and worships other gods. This definition excludes many First Nation (Native American) peoples as they do not identify as pagans and would like for others to respect their cultural boundaries. Hindu and Buddhist adherents (as a general rule) also do not identify as pagans.
However, because of the ickiness surrounding the etymology of the word pagan, and the lineage/heritage wars about who is more pagan (and thus, more real) (see also: wand wars) than who else, observers to the goings-on coined the word neopagan in response.
Most pagan practices now, are reconstructions at best and personally derived as the norm. With few exceptions, there is not a direct and traceable lineage for whole practices. Especially for those converting from a monotheistic background. Gone is the connection to a direct ancestral practice. Tenuous is the connection to the local land. Personal practices now are a mish-mash of several different concepts, practices, and tools from several different ethnicities, worship practices, and eras.
Modern paganism is a new thing, a new paganism. Thus: “Neopagan” to differentiate between discussions of those following an unbroken ancestral path, and one constructed using modern sources for personal means.
Neopagan is not better nor worse than Pagan. It is merely a frank admission. In the same way that Wicca refers to an exclusive, oath-bound, covened practice, but what is commonly referred to as “Solitary Wicca” is really “Neo-Wicca”. A new path that bears some resemblance to the religion it has descended from, but is fundamentally different.
A Further Notice: Yes, we are aware of the current controversy of some claiming that because of the dominance of European practices in discussions of paganism and Neo-Wicca, only those practices derived from various European sources can be called pagan. We have heard all the comments and arguments for and against this, and it is our official stance that if you wish to be identified as a pagan, then you are a pagan. If you do not wish to be identified as a pagan, then you are not a pagan. It is up to each individual to choose their identity, and not up to a committee of self-important busybodies that has no input in your personal life.
