Here's a link to my blog post which answers your question:
http://www.jainnet.com/knowledgeeldorado/archives/2002/09/05/index.html#grids_vs_clusters

Grid is a type of parallel and distributed system that enables the sharing, selection, and aggregation of resources distributed across "multiple" administrative domains based on their (resources) availability, capability, performance, cost, and users' quality-of-service requirements.

If distributed resources happen to be managed by a single, global centralised scheduling system, then it is a cluster. In cluster, all nodes work cooperatively with common goal and objective as the resource allocation is performed by a centralised, global resource manager. In Grid, each node has its own resource manager and allocation policy.

Veer.
http://www.blogstreet.com/
http://www.jainnet.com/knowledgeeldorado/

> What would be the exact difference between a GRID and a CLUSTER.
> as far as my reading goes, both appear to be the same!