I have seen alot of discussions regarding the topic, and there is in truth not much of a difference between the two. The only difference is that the one is illegal and the other is not. Much Emphasis is made of the fact, by those who promote it, that MLM is legal and therefore cannot be described as a Pyramid Scheme. The opposers of MLM says that even though it is legal the basic structure comes from a Pyramid system, and it has all the inherent drawbacks of a pure Pyramid Scheme. So who is right?

Pyramid Scheme:

Pyramid scheme: An illegal multi level program wherein people pay an entrance fee for the sole opportunity to recruit others to do the same.
Members to the scheme pay a joining fee which is passed on to those above them in the scheme. Their purpose is to recruit new members below them in the scheme in order to qualify for a share of their joining fee.

• Position in this Scheme is important.

The scheme is based on a pyramid structure, hence the name, with a few people at the top, and a increasing number of people in each layer below. Money paid in by investors flows from the botoom to the top, it is therefore important to be at the top or as close to the top of the pyramid as possible. By design 90% of members will make a loss and only 1% will make a significant Profit. Your position in the pyramid dictates whether you will make money or not, not how hard you at it.

• Make money by recruiting others.

The idea behind a pyramid scheme is to encourage others to join under you in a potentially endless chain. You then get a percentage of their joining fee and also get a percentage of the members fees they in turn recruit under them, upto several layers deep. This is where the promise of great wealth comes in play and the SCAM is sold. In reality this cannot be achieved, due to the difficulty of attracting new members, 90% will always stay at the bottom or near the bottom and will ultimately lose their money. It is this feature of Pyramid Schemes that guarantees failure for the majority, and renders them illegal.

• Your profits come from other members investments.

The promise of great wealth comes from the concept of a downline. The downline consists of the members you have recruited directly, and subsequently the members they in turn introduce into the system. You will receive a percentage of the investment that each new recruit make in your downline. With a downline several layers deep the potential is there for a downline of thousands of members. In reality this downline is unachievable both practically and mathematically. This is where the FRAUD comes into play in Pyramid Schemes. They are bound to fail by design.

MLM (Multi Level Marketing):

Multi Level Marketing: A multi level program wherein people pay an entrance fee for the opportunity to sell products and to recruit others to do the same.
Members to the scheme pay a joining fee which is passed on to those above them in the scheme. The members purpose is to sell products in return for a commission payment and to recruit new members below them in the scheme in order to qualify for a share of the new members commission.

• Your position is important.

MLM was born out of pyramid schemes and as such the structure and the nature is very similar. The concept of the downline that will earn you money works in the same way, you sponsor new members and earn commission from them in a multilevel structure.
As with an illegal pyramid scheme, unless you are at or near the top of the pyramid it is likely that you will lose money. Once the scheme has passed its saturation point, no amount of hard work or enthusiasm will make a difference.

• Earn money through recruiting.

The difference between a pyramid scheme and an MLM is that MLM schemes are in the business of selling goods to consumers. This is what makes them legal.
Most MLM schemes in reality, however, promote themselves with the promise of great wealth, the appeal to greed. Selling products to consumers is not the way to make riches in MLM. Any MLM scheme will make it absolutely clear that the only way to make real money is through the recruitment of new members and the creation of a downline.

• Most profits come from your downlines investments.

The downline is the key component to making money in MLM. The concept is identical to illegal pyramid schemes, you make money from the people you introduce into the scheme.
The pitfalls are exactly the same as with pyramids, the vast majority are bound to lose money by design.

Conclusion:

Pyramids are illegal. MLM schemes are legal because of the fact that products are sold. This is the only real difference between the two systems. No amount of rhetoric, wishful thinking, self delusion or fallacious reasoning can alter that fact.
If you remove the products from an MLM, all that is left is a pyramid scheme, this is why MLMs are known as, product based pyramid schemes.

Now that you know this, and my fingers are typed numb, go and have a good look at all the programs you are involved in. You are in for a shock, i guarantee you that.

I am not even going to explain in this post what a matrix and a cycler is. If you can't figure it out after reading my post, then i have no hope for you.

I am including a link to a post Andy made about MLMs more regarding the products that they tend to sell. 3 quick ways to tell if your MLM is Illegal

To learn more about your typical SCAMS. Just some typical scams to be on the lookout for.