The core difference between SaaS (Software as a Service) and traditional software licensing lies in the method of delivery and payment. SaaS applications are hosted in the cloud and can be accessed via the internet, usually involving a subscription model. In contrast, traditional software requires a one-time purchase and installation on individual machines, which can lead to higher upfront costs. SaaS also offers automatic updates and scalability, making it more flexible for users compared to traditional software that could become outdated without manual intervention.