From hive -h :
--hiveconf <property=value> Use value for given property
--hivevar <key=value> Variable subsitution to apply to hive
commands. e.g. --hivevar A=B
I didn't quite feel like the examples from the documentation were adequate, so here's my attempt at an answer.
In the beginning there was only --hiveconf and variable substitution didn't exist.
The --hiveconf option allowed users to set Hive configuration values from the command line and that was it. All Hive configuration values are stored under the hiveconf namespace, i.e. hiveconf:mapred.reduce.tasks. These values allowed you to control things like the number of mappers and reducers, if status messages should be displayed, and if the script should continue on errors.
Later, variable substitution was added. This meant you could now use variables in queries with the ${...} syntax. However, the only variables you could set from the command line were under the hiveconf namespace using --hiveconf, so that's where users put their variables.
Putting your personal variables under the Hive configuration namespace probably won't break anything, but it's also not good form. Later, it was suggested that a hivevar namespace be added specifically for user variables which could also be defined at the command line using --hivevar. This meant a cleaner separation between Hive configuration values and user defined variables.
In summary:
The hiveconf namespace and --hiveconf should be used to set Hive configuration values.
The hivevar namespace and --hivevar should be used to define user variables.
Setting user variables under the hiveconf namespace probably won't break anything, but isn't recommended.