1.LINQ to SQL is an ORM over your relational database schema plus some mappings. LINQ to Entities is an ORM over a conceptual object-less model (ERM) that is a mapping over your relational database schema.

2.There is of course a performance cost of both translating queries into SQL and materializing results as objects. The relative cost of this depends on how complicated the query is and how much data is being retrieved. Yet much of this can be mitigated for server apps by using compiled queries (available soon).