I believe that an application is rejected before somebody looked at the content of the application. Some of the technicalities on which an application might be rejected are listed below.
Reject Criteria 1:
The first step in Reviewing for Eligibility is that INS must ensure that all
applicable fees are present.
Reject Criteria 2:
If the contractor has identified the application as having an incorrect
signature, INS must review the application to determine whether it should be
rejected.
Reject Criteria 3:
In order to be eligible to request adjustment of status, an applicant must
have an approved Employment-based or Family-based petition. These
petitions validate an applicant’s eligibility under a certain section of law
Reject Criteria 4:
When applying for adjustment of status the applicant must be immediately
eligible for the immigrant visa at the time of filing. If the contractor has
identified a lack of visa availability, INS must review the application to
determine if it should be rejected using the priority date of the immigrant visa
petition.
Reject Criteria 5:
Each Service Center has jurisdiction over (or has the authority to process and
adjudicate) a certain sub-set of the total forms received by the INS.
Jurisdiction is determined by geography and by basis for eligibility. If a form
is not from the area serviced by the Service Center or does not fall under a
special program adjudicated by the Service Center, it cannot be processed
there. Therefore, a check for appropriate jurisdiction must be made. The
following criteria will be used for checking jurisdiction.
Now coming to denial, I believe, if some one gos through the application, i.e your application has passed through all the above mentioned and also some which are not listed (for public view), and then they determine that the evidence that we provide is not sufficient they might ask for some more, even after submitting other supporting evidence. If they are not satisfied, Then they are denied.
Rejection is purely a technical issue, denial is a through review of your application, which might not be in the right visa category.
This is what i think is the difference, I might be totally wrong.
Rama