Difference between ISNULL() and COALESCE()

There is very slightly difference between the ISNULL and COALESCE functions.
Both the function Replaces the NULL value with the other specified replacement value but there is a very minor difference between them.

e.g. for ISNULL

DECLARE @var varchar(3)
SET @var = NULL

select ISNULL(@var,'abc')

The out put of this query is 'abc'.

e.g for COALESCE

DECLARE @var varchar(3)
SET @var = NULL

select COALESCE (@var,'abc')

The out put of this query is also 'abc'.

Now i am discussing the difference between them..

The difference is:
"The result of ISNULL() function always takes on the datatype of the first parameter (regardless of whether it is NULL or NOT NULL)
while for COALESCE works, it works like a CASE expression."

The difference between them will be more clear by this example.

DECLARE @var varchar(3)
SET @var = NULL

select ISNULL(@var,'abcdef')

The out put of this query is 'abc'. --as we mention the datatype of @var as varchar of size "3".

----

DECLARE @var varchar(3)
SET @var = NULL

select COALESCE (@var,'abcdef')

The out put of this query is 'abcdef'. -- Regardless the size of the @var.