Excerpt from the MySQL documentation:
The CHAR and VARCHAR types are similar, but differ in the way they are stored and retrieved. As of MySQL 5.0.3, they also differ in maximum length and in whether trailing spaces are retained.
The CHAR and VARCHAR types are declared with a length that indicates the maximum number of characters you want to store. For example, CHAR(30) can hold up to 30 characters.
The length of a CHAR column is fixed to the length that you declare when you create the table. The length can be any value from 0 to 255. When CHAR values are stored, they are right-padded with spaces to the specified length. When CHAR values are retrieved, trailing spaces are removed.
Values in VARCHAR columns are variable-length strings. The length can be specified as a value from 0 to 255 before MySQL 5.0.3, and 0 to 65,535 in 5.0.3 and later versions. The effective maximum length of a VARCHAR in MySQL 5.0.3 and later is subject to the maximum row size (65,535 bytes, which is shared among all columns) and the character set used.
In contrast to CHAR, VARCHAR values are stored as a one-byte or two-byte length prefix plus data. The length prefix indicates the number of bytes in the value. A column uses one length byte if values require no more than 255 bytes, two length bytes if values may require more than 255 bytes.