It used to be that when you went out in search of coconut oil you could only find it in one form: solid. Now that coconut oil is hot, hot, HOT, a typical grocery store has half a dozen types, some solid, some liquid.
What’s the difference? Well both of them actually are coconut oil, even the solid one, for in fact we typically call fats that come from plants “oils” whether they’re solid or not. What we call “fats” are usually tissues or milk products derived from animals.
Whether liquid or solid, both these types of substances contain fatty acids of various kinds, in varying proportions. It’s the saturation of those various fatty acid molecules that ultimately dictates just how firm the particular fat or oil is. Oils generally have a lot more unsaturated fatty acids in them, which is why they tend to be liquid at room temperature, and fats generally have more saturated ones, and so they tend to be firmer.
Coconut oil is somewhat unique in the oil world in that it is very high in saturated fats. Indeed it is so high in saturated fats that it is among the hardest oils in nature. Even so there are more than a few unsaturated fats in the fatty acid mix. By separating those liquid-at-room-temperature fatty acids out — as can be done via a process of melting and distilling — you can have an entirely liquid coconut oil. It’s the same stuff, just “fractionated” as they say in the food industry.
Solid fats tend to be favored in the baking world, which is why I generally buy that. However liquid coconut oil is great as a cooking fat, for sautées and such, and is commonly used for salad dressings.