This is very common question asked by couple of companies and I noticed developers usually gets confused about the difference.

When we talk about multi-layer, we usually mean an application broken down into multiple layers such as a Database Layer, a Business Layer, and a User-interface layer. All of these layers may be seperate assemblies. For example, UI layer may have APS.NET pages, Business layer may be BL.dll and the data layer may be Db.dll. However, these all assemblies usually reside on the same machine where the application runs.

When we talk about multi-tier, these assemblies reside on seperate physical machines. In other words, there will be more than one physical machine involved in multi-tier applicaiton.