What is the difference between varchar and varchar2 in Oracle?

Taken from the latest stable Oracle production version 12.2: Data Types

The major difference is that VARCHAR2 is an internal data type and VARCHAR is an external data type. So we need to understand the difference between an internal and external data type...

Inside a database, values are stored in columns in tables. Internally, Oracle represents data in particular formats known as internal data types.

In general, OCI (Oracle Call Interface) applications do not work with internal data type representations of data, but with host language data types that are predefined by the language in which they are written. When data is transferred between an OCI client application and a database table, the OCI libraries convert the data between internal data types and external data types.

External types provide a convenience for the programmer by making it possible to work with host language types instead of proprietary data formats. OCI can perform a wide range of data type conversions when transferring data between an Oracle database and an OCI application. There are more OCI external data types than Oracle internal data types.

The VARCHAR2 data type is a variable-length string of characters with a maximum length of 4000 bytes. If the init.ora parameter max_string_size is default, the maximum length of a VARCHAR2 can be 4000 bytes. If the init.ora parameter max_string_size = extended, the maximum length of a VARCHAR2 can be 32767 bytes

The VARCHAR data type stores character strings of varying length. The first 2 bytes contain the length of the character string, and the remaining bytes contain the string. The specified length of the string in a bind or a define call must include the two length bytes, so the largest VARCHAR string that can be received or sent is 65533 bytes long, not 65535.

A quick test in a 12.2 database suggests that as an internal data type, Oracle still treats a VARCHAR as a pseudotype for VARCHAR2. It is NOT a SYNONYM which is an actual object type in Oracle.

SQL> select substr(banner,1,80) from v$version where rownum=1;
Oracle Database 12c Enterprise Edition Release 12.2.0.1.0 - 64bit Production    

SQL> create table test (my_char varchar(20));
Table created.

SQL> desc test
Name                 Null?    Type
MY_CHAR                       VARCHAR2(20)

There are also some implications of VARCHAR for ProC/C++ Precompiler options. For programmers who are interested, the link is at: Pro*C/C++ Programmer's Guide

As for now, they are synonyms.

VARCHAR is reserved by Oracle to support distinction between NULL and empty string in future, as ANSI standard prescribes.

VARCHAR2 does not distinguish between a NULL and empty string, and never will.

If you rely on empty string and NULL being the same thing, you should use VARCHAR2.

After some experimentation (see below), I can confirm that as of September 2017, nothing has changed with regards to the functionality described in the accepted answer:-

1. Rextester demo for Oracle 11g: Empty strings are inserted as NULLs for both VARCHAR and VARCHAR2.
2. LiveSQL demo for Oracle 12c: Same results.

The historical reason for these two keywords is explained well in an answer to a different question.

Currently VARCHAR behaves exactly the same as VARCHAR2. However, the type VARCHAR should not be used as it is reserved for future usage.

Taken from: Difference Between CHAR, VARCHAR, VARCHAR2