For those (like myself) who struggle with medical terms) Here are 2 pertinent definitions:

Differentiation: In cancer, refers to how mature (developed) the cancer cells are in a tumor. Differentiated tumor cells resemble normal cells and tend to grow and spread at a slower rate than undifferentiated or poorly differentiated tumor cells, which lack the structure and function of normal cells and grow uncontrollably.
(source NCI cancer definitions) Bear in mind that the above definition would a resultant part of the differential diagnosis. Even though both of these terms have similar roots, they have very different meanings in a medical context.

Differential Diagnosis: In medicine, differential diagnosis (sometimes abbreviated DDx or ΔΔ) is the systematic method physicians use to identify the disease causing a patient's symptoms.

Before a medical condition can be treated, it must be identified. The physician begins by observing the patient's symptoms, examining the patient, and often taking the patient's personal and family history. Then the physician lists the most likely causes. The physician asks questions and performs tests to eliminate possibilities until he or she is satisfied that the single most likely cause has been identified.

Once a working diagnosis is reached, the physician prescribes a therapy. If the patient's condition does not improve, the diagnosis must be reassessed.

The method of differential diagnosis was first suggested for use in the diagnosis of mental disorders by Emil Kraepelin. It is more systematic than the old-fashioned method of diagnosis by gestalt (impression).

The term differential diagnosis also refers to medical information specially organized to aid in diagnosis, particularly a list of the most common causes of a given symptom, annotated with advice on how to narrow down the list. For example, this differential diagnosis of sclerotic bone lesions lists nine common causes, including infection, trauma, and drugs.

Example
The patient presents with symptoms A and B. The physician creates a list of diseases that include symptoms A and B. There are three diseases that feature both symptoms:

Disease 1: A, B, C
Disease 2: A, B, C, D
Disease 3: A, B, E
The physician can test for the presence of symptom C. This would either support 1 and 2 or support 3. If the client tested positive for C, a test for D could be used to differentiate between disease 1 and 2. If the client tested negative for C, a test for E would confirm the diagnosis of disease 3.

In modern medicine, physicians typically decide to perform tests based on weighing the likelihood of a positive result against the severity of the disease if it were to remain undiagnosed. For example, if an 18 year old with no personal or family history of heart disease complains of chest pain, the physician is much less likely to be concerned that a heart attack occurred than if the patient were 65 years old.

(source Wikipedia)