When you use the -m command-line flag, Python will import a module or package for you, then run it as a script. When you don’t use the -m flag, the file you named is run as just a script.
The distinction is important when you try to run a package. There is a big difference between:
python foo/bar/baz.py
and
python -m foo.bar.baz
as in the latter case, foo.bar is imported and relative imports will work correctly with foo.bar as the starting point.
Demo:
$ mkdir -p test/foo/bar
$ touch test/foo/__init__.py
$ touch test/foo/bar/__init__.py
$ cat << EOF > test/foo/bar/baz.py
> if __name__ == "__main__":
> print __package__
> print __name__
>
> EOF
$ PYTHONPATH=test python test/foo/bar/baz.py
None
__main__
$ PYTHONPATH=test python -m foo.bar.baz
foo.bar
__main__
As a result, Python has to actually care about packages when using the -m switch. A normal script can never be a package, so __package__ is set to None.
But run a package or module inside a package with -m and now there is at least the possibility of a package, so the __package__ variable is set to a string value; in the above demonstration it is set to 'foo.bar', for plain modules not inside a package it is set to an empty string.
As for the __main__ module, Python imports scripts being run as it would import regular modules. A new module object is created to hold the global namespace and is stored in sys.modules['__main__']. This is what the __name__ variable refers to, it is a key in that structure.
For packages, you can create a __main__.py module inside and have that run when running python -m package_name; in fact that is the only way you can run a package as a script:
$ PYTHONPATH=test python -m foo.bar
python: No module named foo.bar.__main__; 'foo.bar' is a package and cannot be directly executed
$ cp test/foo/bar/baz.py test/foo/bar/__main__.py
$ PYTHONPATH=test python -m foo.bar
foo.bar
__main__
So, when naming a package for running with -m, Python looks for a __main__ module contained in that package and executes that as a script. Its name is then still set to '__main__' and the module object is still stored in sys.modules['__main__'].