The biggest technical difference between the two is the D80 has a built in focussing motor the D40 does not. 

In practical terms this means the D80 can be used with a much wider range of lenses than the D40.  Use both Nikon and third party lenses.

The D40 can only be used with a limited range of Nikon AFs lenses that have built in focussing motors.

And every one said, 'If we only live,
We too will go to sea in a Sieve,---
To the hills of the Chankly Bore!'
Far and few, far and few, Are the lands where the Jumblies live;
Their heads are green, and their hands are blue, And they went to sea in a Sieve.

Edward Lear
http://www.nonsenselit.org/Lear/ns/jumblies.html