What is the difference between initrd and initramfs?
Initrd is deprecated, replaced by Initramfs, which doesn't have some of the weaknesses of initrd:
- Initrd requires at least one file system driver be compiled into the kernel
- A disk created by Initrd has got to have a fixed size
- All of the reads/writes on Initrd are buffered redundantly (unnecessarily) into main memory
I think that's all.
How does this update-initramfs command generate /boot/initrd.img?
It makes the necessary files into a cpio archive, which is a binary archive format (very similar to tar, not extensively used in Linux) and then uses gzip to compress that archive. Gzip is not an archive itself, just a compression (which is why you get .tar.gz archive files).
At boot time, the archive is uncompressed and unpacked onto a ram-disk.
Also see: How a computer boots
initrd was block device based, initramfs is file base.
with initrd, you created a file system image. with initramfs, you create an archive with the files which the kernel extracts to a tmpfs.