AWS (acronym for Amazon Web Services) is a subsidiary Amazon Inc that provides on-demand reliable, scalable, and inexpensive cloud services to individuals, corporate organisations and governments.
IAM is the Identity and Access Management of the AWS Accounts, this is where the whole AWS Security is managed, including Users, Groups and Roles. IAM is very important because, it is discouraged for a user to use or share his/her root account. Root users are supposed to create a group and roles with appropriate access and grant the roles to their users. Root users have access to all the AWS infrastructure.