I think it has to do with cache sizes and clock speeds, but I could be wrong. I'd go with the i7 2600K if you are trying to decide on a system CPU.

These videos are two years old but I think they are still relevant.

Depends on the budget and what you want to do aswell, want to play games and only have almost enough for the i7, get the i5 and the best single gpu video card.

Want 'encoding' PC, get the i7 with one heck of alot of RAM.

Primary difference between the two is pretty simple. core i5 - 4 cores = 4 threads, core i7 - 4 cores + hyperthreading = 8 threads. If you are going to just be building a gaming rig, save yourself some money and get the i5 2500k. Put the extra cash towards a better video card. The i5 2500k is plenty for gaming. If you are doing video editing, photoshop, or graphics rendering you could step up to the 2600k, but it's not really necessary.