Silverlight and Windows Presentation Foundation (WPF) are 2 different products from Microsoft, but has lot of overlap. Silverlight is a sub set of WPF in terms of features and functionality.
Silverlight is a Microsoft technology, competing with Adobes Flash and is meant for developing rich browser based internet applications.
WPF is a Microsoft technology meant for developing enhanced graphics applications for desktop platform. In addition, WPF applications can be hosted on web browsers which offers rich graphics features for web applications. Web Browser Appliactions (WBA) developed on WPF technology uses XAML to host user interface for browser applications. XAML stands for eXtended Application Markup Language which is a new declarative programming model from Microsoft. XAML files are hosted as descrete files in the Web server, but are downloaded to the browsers and converted to user interface by the .NET runtime in the client browsers.
WPF runs on .NET runtime and developers can take advantage of the rich .NET Framework and WPF libraries to build really cool windows applications. WPF supports 3-D graphics, complex animations, hardware acceleration etc.