Can someone explain the difference between a downloaded podcast episode and a "saved" episode?

Both saved and downloaded episodes are saved in files. There are no apparent differences in file names, file permissions, or other file attributes between "saved" versus just "downloaded" episodes.

The only significant effect I see of setting an episode to "saved" is a change a in the behavior of the iTunes delete operation. Specifically, when a saved episode is deleted, its status changes from "saved" to "downloaded", but the file is not deleted. When a downloaded episode is deleted, the file is deleted at the OS level (to the Trash). Another minor effect is that saved episodes are removed from the "feed" display list, whereas downloaded episodes remain in the "feed" display list.

It is possible that a saved episode is treated differently with respect to the "Delete Played Episodes" setting. I've not looked into this, since this setting takes effect after 24 hours, and I don't feel like waiting around to find out.

It is annoying in the extreme that Apple's software documentation has become woefully lacking compared to years past. It's particularly annoying in the case of iTunes, given its myriad quirks and obtuse behavior.

With all the money Apple spends on corporate image, it's rather surprising that they don't better document and explain their products. For example, devoting a few staff positions to answering questions on their own discussion sites could relieve a great deal of customer frustration. Perhaps they're concerned that doing so might cut into their Apple Care profit margins. Whatever their reasons, Apple's behavior in this regard is absolutely infuriating to me, and I suspect to many others who'd prefer not to search message boards, often unsuccessfully, for answers to questions that Apple could themselves very easily provide.

ahh, so it really should have been called "cached"