Groups are used for collaboration between users, both inside and outside your company.
there are Five basic group types
Distribution groups OR Distribution Lists: Used for sending email notifications to a group of people.
Dynamic Distribution Lists: Created to expedite the mass sending of email messages and other information within an organization.
Security groups: Used for granting access to Microsoft 365 resources, such as SharePoint. They can make administration easier because you need only administer the group rather than adding users to each resource individually. Microsoft 365 Groups can't be members of security groups.
Mail Enabled Security Group: Used for granting access to resources such as SharePoint, and emailing notifications to those users. They include the ability to send mail to all the members of the group. Mail-enabled security groups can be added to a team.
Microsoft 365 Group OR Office 365 Group: Used for collaboration between users, both inside and outside your company. They include collaboration services such as SharePoint and Planner.
Office 365 Groups vs distribution lists
Microsoft 365 Groups and Distribution lists – similarities
Distribution lists are known to both Microsoft 365 admins and even the oldest Exchange on-premises experts. DLs have been around for a while, and the idea behind them is quite simple. They allow users to write or forward their messages to a group of users, whether it is a single department, members of the same office, or the whole company. For those who work most of their day in Outlook, it is a feature used so much that they do not think about it.
Another similarity is that both distribution lists and Microsoft 365 Groups are managed in the same way. Although the cmdlets used to work on them are a bit different, their attributes are quite similar in most cases. In fact, if you change the New-Distribution Group cmdlet to New-Unified Group while leaving the same parameters, the code will most likely be executed with no issues.
Microsoft 365 Groups and distribution lists also look very alike from the Exchange Admin Center point of view – they both use the same wizard to create them. But that is as far as the similarities go.
Differences between Microsoft 365 Groups and distribution lists
The most important reason to use Microsoft 365 Groups is enhancing collaboration. While distribution lists have the same purpose, Microsoft 365 Groups go a few steps further.
The first difference is that Microsoft 365 Groups have a shared mailbox and calendar. This means that emails are not only distributed to all members of the list – they are stored in a separate mailbox. The shared calendar gives the functionality previously reserved for public folders.
However, the differences mentioned above fall into the category of Outlook and OWA features. Microsoft 365 can do more than that. Depending on what functionalities you need, a group can be created along with an associated SharePoint library, OneNote notebook, Microsoft Teams, etc.
You can see another set of differences in EAC. Despite the similarities to a distribution list, a Microsoft 365 Group has two additional fields: Privacy and Subscribe member.