An object is a database-resident chunk of data. An entity is an object that has a graphical representation.
From Autodesk's DXF-references:Object and Entity Codes
In the DXF™ format, the definition of objects differs from entities: objects
have no graphical representation and entities do.
OK, sounds like everyone agrees that all Entities are Objects, but not all Objects are Entities. Again, what about toolbars, which have a graphic representation, but are considered Objects and not Entities (according to Autodesk's documentation)? And what about something like a COGO Point, which is considered an Entity (also according to Autodesk's documentation), but is stored in a separate database, and therefore has no DXF representation?
In standard usage in computer programming, an Entity Object is an object that incorporates "business logic", or logic specific to the particular application. Entity Objects would typically not be reused in writing another application, because they are very specific to the task at hand. This is in contrast to generic Objects, such as UI elements, data structures, etc.
Entities in Autocad are similar. From what I gather, it seems that Autodesk considers an Entity to be an Object that can have a graphical representation IN A DRAWING. That does not mean that the object has to exist in a DWG file - in other words, an Entity might not have a DXF representation. But it would still be an Entity. On the other hand, a Toolbar Item would be an Object, but not an Entity, because it does not have a graphical representation IN THE DRAWING.
A Block seems to be considered an Object because it has no direct representation in the drawing. However, a Block is a collection of Entities, and the Entities have a representation in the drawing. Similarly, a Linetype defines display properties for Entities, but has no direct representation in the drawing, so it is an Object. Layers, Materials, PlotConfigurations, TextStyles, UCSs, all of these are Objects.
As an interesting quirk, this also means a Paperspace Viewport is an Entity, while a View is an Object.
In Vanilla Autocad, there are actually no Entities that are not stored in the DWG file. That is not true in Land Desktop, however, where items like COGO Points and Finish Grade Profiles are stored in the Project, but still considered to be Entities.
But the answer is not at all clear-cut. It is interesting to note the differences between Land Desktop and Civil-3D. In Land Desktop, an Alignment is an Object, composed of a collection of Entities like AlignTangent, AlignCurve, AlignSpiral, EGProfile, and FGProfile. In Civil-3D, however, the Alignment is now an Entity, and its horizontal layout is considered a property of the Alignment. Profiles are still Entities in their own right, but the EGProfile and FGProfile Entities have been combined into a single Profile Entity. PVIs used to be Entities in Land Desktop; in Civil-3D, they are considered Properties of Profiles Enitites.
Similarly, a Surface is an Object in Land Desktop that contains a collection of Entities like Breaklines and Boundaries. In Civil-3D, a Surface is considered to be an Entity in its own right.
So, it seems that what constitutes an Entity depends in large part in how you look at it...
