What is the difference between setup project and setup wizard?

The Setup Wizard will use about 5 steps to lead you create any kind of Setup Project/ Web Setup Project / Merge Module Project / CAB Project,

And the Setup Project creates a Setup Project.

I make the screenshot of steps of Setup Wizard to create Setup Project:

1.Welcome Page

2.Choose Create a setup for a Windosws application, the other 3 options can create Web Setup Project / Merge Module Project / CAB Project

3.Choose project outputs to include, here will show other projects in the same solution for you to choose from

4.If you have other files to include, you can add here

5.Summary and check, click finish to create

6.The final create screen is same as directly create a Setup Project.

In fact, every steps in the Setup Wizard all can be set somewhere in the directly created Setup Project.

The Setup Wizard will help automate the creation of one of the project types shown in the dialog.

The Setup Project option creates an installer for a Windows-based application.

See Microsoft Learn: "How to: Create or Add a Setup Project"