OEM - Original Equipment Manufacturer.
This means you get JUST the CPU and nothing else.
Retail - You get the stock heatsink and fan, plus the manufacturer warrenty which is generally 3 years.
Personally I would never buy an OEM chip unless it's like the XP-Mobile which is nothing but OEM. But the warrenty is definitely worth the extra bucks. Plus if you don't have a heatsink you'll need the retail anyway