Suddenly I had been asked this question! Although it sounded easy for me to answer as a daily user of MS Project Pro. But guess what, I found that I did not have the complete answer.
So, the first moment after, I opened MS Project Help, searched for that topic and I found that it is little bit tricky. The physical % complete is a field that can be used to calculate the Earned Value, now the question is How!
I will use the same example found in that help page, assume that one task in your project is to build a stone wall, the wall is a 5 rows one, each has 10 stones.
The first row takes 20 minutes
The second takes 25 minutes because it is little bit harder.
The third takes 30, the forth 35 and the fifth will take 40 minutes
After completing three row then we can report the % Complete and % Physical Complete as per the figure below
I hope that illustrate the difference for you, for me it really did