Federalism is a structural system of government where power is divided between a national government and individual state governments. In contrast, democracy is a form of government where power is vested in the people, who exercise it either directly or through elected representatives. While federalism aims to balance power between different levels of government, democracy focuses on allowing citizens to have an active role in the government decision-making process. Despite these differences, both systems can exist simultaneously within a country and can complement each other.