An analogy to understand the difference:
Basic authentication:
To understand how Basic Authentication actually works, here is an analogy. Imagine the following scenario: You fly abroad, leave the plane and are heading for the border control. Instead of showing your passport, you tell the security officer: “Hi, my name is John Doe, my password is XYZ and I’m originally from Germany”. With this information, the security officer gives the national authorities in Germany a call and explains the following: “There’s a guy at my desk who wants to enter our country. He says he’s from Germany, his name is John Doe and his password is XYZ. Is that correct?”. The authorities check the information and confirm it. So, the security officer is happy to tell you that your information is correct and you’re allowed to enter the country. There are no additional checks like a passport with additional information like a photo, etc. How would the security officer know you are the person you are claiming to be? And anyone who knows your name and your password could pretend to be you.
Modern authentication:
How would Modern Authentication look like in our airport analogy? With Modern Authentication, the procedure seems quite familiar: You fly abroad, leave the plane and go to the security officer at the border control. The officer asks to see your passport on which he can find all the important information needed to identify who you are and where you are from. This information is protected by anti-forgery mechanisms. In the digital word, the passport is what we call an ID token. This token contains important information: who you are, who created the token, how long it is valid, etc.
A bit of the actual differences (not an analogy):
Basic authentication has some drawbacks: Information is sent over the network as cleartext. It is sent in an unencrypted format. Any password sent using basic authentication can easily be decoded.
Modern authentication uses security tokens during the authentication process. Security tokens allow a client application like Outlook (email client) to access protected resources on a resource server like Exchange (email server). Authentication tokens identify a user — the person — that is using the app. Tokens are secured in a number of ways. This ensures they cannot be shared or maliciously used by anyone.
