In terms of common usage, the words "ego" and "self" are roughly interchangeable, indicating the perceived boundaries of each individual, both physical and mental. But in Buddhist thing, both the words ego and self are merely conventional expressions of concepts which do not refer to anything which actually exists, because such percived boundaries are illusory.
However, identifying these concepts as illusory spawns different conclusions for people at differing stages of spiritual development. It would be utterly impractical, not to mention unwise, for us to adopt the view that "there is no self" (a perception which emerges from our experience). The important issue to my own perspective is not how to rid myself of this perception, but rather how to use it most productively, and how to avoid using it foolishly.
EGOISM v EGOTISM: For us worldly (non-renounced) practitioners of the dharma, in the beginning stages we can utilize various mundane motivations to help us "strive" to make spiritual progress. In our daily life, paying heed to such percieved boundaries between individuals, whether they be illusory or not, has some practical value which cannot be ignored (ie, egoism, which helps to keep us earnestly and vigorously walking the path) -- and also some risk, which cannot be ignored (ie, egotism, which leads us off the path). AFter all, it is the illusory boundaries of self or ego which give a sense of who it is that is either walking or leaving the path, and until you have achieved a truly rarefied state of consciousness, that illusory sense of self is what keeps us moving forward and improving ourselves.
But one must be alert to the slightest indications of when egoism becomes egotism. When pride creeps in (such as Bodhi's aspirations to be the most advanced among his peers), it's appropriate to move away from such self-oriented identity and motivations, and to eventually let go of object-driven psychology altogether. Vigilant and detached self-awareness is required to avoid the pitfalls of egotism.
Thus ego is like money, in a sense -- it is something which can be used creatively or destructively, for benefit or for harm, depending on the consciousness of the user.
On the other hand, one could observe that ego is also like money, because the freer you are of ego, the freer you are from worldly pressures!
-- David Lourie
