Sav has it pretty much right. But just to clarify further...

"Plaid" actually comes from the Gaelic word for blanket. That's why the feileadh-mhor (Gaelic for "large wrap") is sometimes also called the belted plaid. Because it is a blanket that has been gathered and belted around your waist.

People, historically, also wore unbelted plaids -- large shawls in other words. And plaid, in the context of modern highland dress, can refer to any of the tailored or untailored garments worn about the shoulders -- be it a fly plaid, piper's plaid, drummer's plaid, or a folded picnic blanket.

So "plaid" refers to the clothing, no matter what the pattern of the fabric is -- even if it is solid color.

But the plaids most often were of a tartan pattern, or course. Which is why the words "plaid" and "tartan" have become so confused. Not only do we have people referring to tartan as "plaid" but I also encounter many people who refer to plaids and kilts as "tartans."

The Gaelic word for tartan is "breacan" which simply means "speckled." Oddly enough, they don't really have a precise word for a tartan pattern. The word tartan itself seems to have entered the vocabulary from the French word "tiretain" which originally referred to a type of linsey-woolsy cloth being imported from France in the sixteenth century. Why and how the word came to be applied to this particular form of pattern isn't really known.

But, in short, plaid is a garment, tartan is a pattern.

Aye,
Matt