What is the difference between a demon and a fallen angel?
Demons are the disembodied spirits that come from the death of the hybrid offspring of the Fallen Angels. Due to the unnatural origins of the Nephalim/Rephaim/Emims/Anakims [born of genetic manipulation by the sons of God with human womenGen 6:1-6] When they die there is no where for their spirits to go, since they were not created naturally by GOD there is no natural place for them. This is why they so strongly desire to dwell within us or possess us, because they once had a body of thier own. They do not possess what would be considered a spirit body as an angel does, all they knew was a physical body, so it's torment for them to be without a physical body.
Jesus Christ mentions this phenomena here in Luke 11:24 "When the unclean spirit is gone out of a man, he walketh through dry places, seeking rest; and finding none, he saith, I will return unto my house whence I came out."
There are many places in the bible that refer to the ancient races of giants or Nephalim/Rephaim that terrorized humans as follows: Anakims (9 Occurrences)
Emim (3 Occurrences)
Rephaim (32 occurrences)
Reph'aim (17 Occurrences)
Zuzim (1 Occurrence)
Ashteroth-karnaim (1 Occurrence)
That is just a short sample of reference material contained here
Nephalim not to be confused with B'nai HaElohim = Sons of God or ...
Fallen Angels are always referred to as Sons of God- (B'nai HaElohim) never rephaim or nephalim etc.
In Psalms 82:6,7 God is speaking of their punishment for corrupting the flesh of mankind with their genetic experiments and forsaking their natural kingdom for something that is an aberration or unnatural.
Gen 6 speaks of this fall from grace for the B'nai HaElohim or Sons of God "1And it came to pass, when men began to multiply on the face of the earth, and daughters were born unto them, 2That the sons of God saw the daughters of men that they were fair; and they took them wives of all which they chose.3And the LORD said, My spirit shall not always strive with man, for that he also is flesh: yet his days shall be an hundred and twenty years. 4There were giants in the earth in those days; and also after that, when the sons of God came in unto the daughters of men, and they bare children to them, the same becamemighty men which were of old, men of renown. "
Some sects of Christianity wrongly interpret the 'Sons of God & Daughters of Men' as 'Sons of Seth & Daughters of Cain', rather than the real meaning 'B'nai HaElohim' which is a supernatural creature rather than mortal men. See Dr. Chuck Misslers summary of this issue here.