Distinction is a clear difference between two or more things. It can also mean special honor, excellence, or recognition for being better than usual.
From Latin 'distinctio' meaning 'separation, difference', from 'distinguere' meaning 'to separate, mark off'. The sense of being 'set apart' led to the idea of special honor.
One word does double duty here: you can 'draw a distinction' between ideas, or graduate 'with distinction'. Both images are about being set apart from the rest—either to compare or to celebrate.
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