Diagnostically the difference is if a person has ever had a full mania, or only hypomania. One full manic episode is enough for the bipolar 1 diagnosis, with or without depression. Bipolar 2 has to have at least one major depressive episode, and at least one hypomanic episode, but no full manic episodes. Type 1 folks have more extreme manias, but type 2's tend to spend more time depressed. So severity isn't necessarily reflected by the 1 or 2 label, even though type 1 is usually considered more severe.

Drawing the line between mania and hypomania can be trickier, because it's not always obvious. One way to think about it is function - if the person can still function it's probably hypomania, but if they are past that point, probably mania. By definition if hospitalization is required it's considered mania.

Anyways, my label is type 2, although sometimes i think it should be 1 because things have gotten very crazy at times, including needing hospitilization, but i've spent way more time depressed than elevated through my life. But ultimately the label doesn't matter really.