What is the difference between layer 4 and layer 7 server load balancer?

Layer 4 SLB, or so-called layer 4 switches, directs the traffic towards servers according to certain predefined algorithms such as round robin, while layer 7 SLB directs the traffic based on contents, such as URL, cookie or SSL session ID.
With layer 7 switches, you will be able to do more intelligent switching; however, you will also sacrifice the system performance because it takes more time for SLB to parse the contents and do the switching judgment.
Usually, it is advised to use layer 4 switches if the situation is allowed unless your applications need layer 7 features.
For example, i-mode servers need URL parsing feature (Layer 7 feature) for load balancing.