What is the difference between transport and tunnel mode?

Transport mode is when the IPaddress that is used to determine the IPsec VPN client is transmitting data to a remote server.

Tunnel mode is when the IPaddress that is used to determine the IPsec VPN client is receiving data from a remote server and transmitting it back to the local network. Transport and tunnel modes are typically both implemented in transport-mode IKEv1, but there's no reason they can't be used in transport-mode IKEv2 or one of the tunnel modes in IKEv2 Tunnel Mode.