The devotional tendency of human beings is to want to worship the Deity they see as the object of their devotion, as well as individuals they perceive to be Saints, Sages, Seers or Enlightened Beings. Seeing the superior force of consciousness manifesting through these individuals, they naturally begin to consider them to be Avatars or partial Avatars. The dividing line between human and divine action becomes somewhat blurred when we once acknowledge consciousness as One and admit that the Divine Consciousness is implicit in all existence. At this point we come to the distinction that the Gita makes between the Vibhuti and the Avatar. In both cases as Sri Aurobindo phrases it, …”it is the sense of the divine in humanity.”
“But still the Vibhuti is not the Avatar…” “The divine quality is not enough; there must be the inner consciousness of the Lord and Self governing the human nature by his divine presence. The heightening of the power of the qualities is part of the becoming,…an ascent in the ordinary manifestation; in the Avatar there is the special manifestation, the divine birth from above, the eternal and universal Godhead descended into a form of individual humanity….and conscious not only behind the veil but in the outward nature.”
Thus the essential difference between the two, while there may be some noticeable difference of the power or intensity of the outer working, is really the difference of inner identification and standpoint, and the aspect of it being a descent from above. The Avatar is conscious of his divine status and lives and works from the standpoint of the Divine; while the Vibhuti may act with an intensity and power of manifestation, but he is essentially rooted in and acting from the human consciousness.
Sri Aurobindo, Essays on the Gita, First Series, Chapter 16, The Process of Avatarhood, pg. 152