drstawl is soooooo close to the perfect description.
A large diaphram will "usually" have more sensitivity. Often the diaphram is made with very lightweight materials.
I think though the main difference in small and big is big diaphrams tend to pick up a fuller sound due to the increased diaphram size. There is more material area to catch the sound wave. Generally, large diaphram condensers are used for micing applications that a more full range sound is sought with great detail. This can include vocals, overheads for drums, acoustic guitars (if full bodied sound is sought for the track)percussion, hell, just about anything. I use large diaphram condensers on guitar solos, horns, anything really.
Small diaphram condensers deal with sound a bit different. They have a more direct quality to them due to the smaller diaphram size. It is harder to get a really detailed, full bodied sound with this kind of mic. But there are many applications where a full bodied detailed sound is not required.
Often, to get a very detailed high end sound on a
acoustic guitar a small diaphram mic is the ticket. Due to the small size, the on/off axis response of the mic comes into play alot more. It is much easier to get a "specific" part of the sound to come out without room sounds and what not from coming into play. So you could say they are a bit more directional overall although this should not be confused with the polar pickup pattern of the mic. It is a little hard to explain. Anyway, great uses for a small diaphram condenser are acoustic guitars that will be double mic'ed, drum overheads (for a bit thinner sound than using large diaphrams), hi hats, percussion (same exception as overheads), bowed instruments, hell, once again almost any application.
Like I say, the main difference is going to be that large diaphrams pick up a more full bodied sound. They make a better all around mic because they have more variety in what they can pick up. But small diaphram condersers have a very detailed sound also, but are better in applications where isolation is important. Or where a more specific type of response is required.
It is apples and oranges really. It is very helpful to have at least one of each. There is not real way to say that one or the other will cover you in all situations. But if you had to choose, a large diaphram would probably serve you better overall.
Ed