The term soft-processorⁱ is used to refer to microprocessors which are not provided to the customer as a physical chip but are instead provided to the customer in some kind of synthesizable description, typically an HDL such as VHDL or Verilog. Typically this is done so that the customer can customize the processor based on their specific needs. For instance, the MicroBlazeⁱ soft-processorⁱ from Xilinxⁱ allows the customer to optionally include components such as a FPUⁱ or an MMUⁱ.

The ability to customize to the customer's specific needs provides a significant advantage to soft-processors over traditional processors. By only including the needed functionality, system designs can be reduced in size, and thus, can be most cost effective. However, soft-processors do typically have the disadvantage of being significantly lower performance than their traditional counter-parts.

The term system-on-chipⁱ describes exactly what is says, an entire system on a single chip. Traditionally, computer systems are designed with different chips for different parts of the system. For instance, mainstream desktop computers typically contain at least one chip for the processor, one chip for the north bridge (for controlling the system memory) and one chip for the south bridge (for performing device I/O).

System-on-chip designs replace the multiple chips with a single chip which implements all of the functionality in the system. The advantage is tighter integration and cost reduction. The disadvantage is that the system design usually contains reduced functionality over the multiple chip designs due to size constraints when working with a single chip.