AVCHD files are based on the MPEG4 CODEC, can be burned to Blu-ray discs and played in compatible devices, such as Blu-ray disc players and the Sony PlayStation3. Also, the files can be played back directly from a camcorder on an HD television set, through HDMI or component-video cable. On a computer, the files can be played from the camcorder connected via USB as an external storage device, or from removable media or from the computer's internal hard disk drive. Presently, the default media players from Apple (QuickTime) will not play AVCHD natively. And iMovie also can not import m2ts directly, but M2TS to iMovie Converter can convert m2ts to iMovie, so import m2ts to imovie will be easy.
M2TS is the proper file extension for BDAV and is allowed in modern file systems that use long file names. A problem arises when you use a legacy file system that uses the 8.3 naming convention. It basically means that you can only have 8 characters before the dot and 3 characters after that as its extension. As M2TS consists of 4 characters, it cannot be used as an extension in legacy file systems. This led to the creation of MTS as a substitute extension.
The need to make BDAV compatible with the 8.3 naming conventions stems from the use of AVCHD of this format. AVCHD camcorders use memory cards or other forms of digital storage instead of the typical tapes for recording videos; directly encoding the file into the BDAV format. Since memory cards use FAT32 for compatibility purposes, AVCHD is forced to use the 8.3 naming convention for saving the files. Blu-ray discs can use long filenames, thus they use the M2TS extension.
A difference worth noting between MTS and M2TS is a direct consequence of AVCHD and Blu-ray; because AVCHD uses a simplified version of Blu-ray encoding. AVCHD only has 1 video encoding algorithm and 2 audio encoding algorithms. So if you get an MTS file, you can reasonably hazard a guess that the files comes from an AVCHD camcorder and that it doesn't use any of the more complex encoding algorithms that are used in Blu-ray discs.
Though both MTS and M2TS are file extensions for the same AVCHD and both support 720p and 1080i HD video formats, there is a slight difference between the two. In the M2TS file, the video file is saved in the high definition Blu-ray BDAV format. Video data on the Blue-ray discs can be saved in one of the three video codecs - MPEG2 Part 2, H.264/MPEG-4 AVC, or SMPTE VC-1; and the audio data in Dolby digital, DTS, or the uncompressed Linear PCM. The M2TS file extension is written as 'xxxxx.m2ts' where the 'xxxxx' are a five digit number corresponding to the audio-visual clip.
To sum it all up, MTS and M2TS are just two extensions used for the same file container format. The differences between the actual contents are not caused directly by the extension but by the standard that encoded the file.
1.The two are different extensions used for the same container format
2.MTS is the extension used in legacy file systems while M2TS is used in more modern ones
3.MTS usually means that the file comes from an AVCHD camcorder while M2TS is from proper Blu-ray