For starters, in the novel the lead character is referred to as Tristran Thorn instead of Tristan. Also, several characters have been omitted, and the scenes with the witch and the ending have been changed. Also in the novel, Tristan's journey is somewhat more lengthy, and goes into more detail about the world of Faerie.
In the book, the witch lives, and Tristan dies as King many years later, then Yvaine rules in his stead (eternally). Some think that the movie adaption ending is the better of the two, as it is more positive.
The movie contains characters not in the book: Captain Shakespeare and Ferdy the Fence were not in the book. Michelle Pfeiffer's character is named Lamia in the movie but has a different name in the book. Tristan Thorn has a mother and sister in the book but in the movie the father is only seen. In the movie one man guards the wall at all times but in the book two men guard both sides of the wall and are replaced every so often by two other men.
In the book Secundus is already dead before the King dies. In the book Septimus is killed by a snake (the witch in another form) as he tries to burn down the house of the witch that killed his brother, Primus, and he dies from venom. Tertius is killed by wine given to him by an lusty chamber maid that was passed along to her by Septimus. The ghosts don't have any kind of spell on them to make them pass along when a new King is crowned. Instead, they just get bored and leave. Una has a different spell that binds her to Ditchwater Sal, and Ditchwater Sal does not die at the end. There is barely any romantic connection between Yvaine and Tristran throughout the book. They come to love each other, of course, but neither of them even really realizes it until he's already gone back to the village of Wall, temporarily leaving her on the other side. Only after Tristran goes back to Wall and finds out that Victoria is engaged to Mr. Monday does he realize that he loves Yvaine and would much rather marry her. The witch, on sensing that Yvaine has fallen in love with Tristran, apologizes for trying to tear out her heart, explaining that she won't try to do so again because Yvaine's heart is no longer her own and therefore won't really do the witches much good. Victoria's husband-to-be, Mr. Monday, has a different first name in the book (Robert, not Humphrey). The name of the boy that turned into a goat was different. Yvaine had a broken leg throughout much of the book. The phrase "babylon candle" was never used in the book nor was it ever used to send both Tristran and Yvaine to the sky at the end (Yvaine being quite sure that such a thing is impossible). Also, at the end, Tristran decides to leave his family behind forever and never see them again for a reason not entirely explained, but having something to do with feeling like he belongs to the world of Faerie. Neil Gaiman claims that the book and movie are very compatible, though the two entities are very different. Instead of chopping some stuff out of the book to condense it for a film they either added stuff that was never mentioned in the book or invented plot lines all together.
The book is also a lot darker and graphic, for example the scene with the unicorn is much more gory. The unicorn is killed with a knife through the eye, then reanimated, later to be decapitated. This is just one of the many ways the movie has lightened the story.