difference between xsl:param and xsl:variable

The difference is that the value of an xsl:param could be
set outside the context in which it is declared. For example,

<xsl:template ...>
   <xsl:param name="p" select="'x'" />
   <xsl:variable name="v" select="'y'" />

then you know that $v will always give you the string 'y'. But for $p the string 'x' is only a default:
you will see a different value if the template is invoked with either
xsl:apply-templates or xsl:call-template which contains an instruction
such as:
<xsl:with-param name="p" select="'not x'" />

<xsl:param> may also be used outside xsl:template, at the top level in
the stylesheet. The value of such a parameter may be set when the
XSLT processor is called. How this is done depends on the processor
and whether you call it from the command line or by program.

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