At a high level, the difference between 'moderated' and 'unmoderated' is whether a researcher (the moderator) oversees the test or the test participant is left to carry out the task without any real-time supervision.
Ok, that's the TL; DR version. Now let's look at each in more detail—along with the benefits and challenges.
Is one method of testing better than the other?
We know what you're thinking. Customers often ask us if moderated usability testing is better than unmoderated testing and vice versa.
In truth, there's no clear-cut answer to this. Both forms of testing are valuable in different contexts.