A reducer is a fitting that connects two pipes of different diameters in a straight run, with the larger pipe fitting directly to one end and the smaller pipe to the other. It is external and acts as a bridge between the two sizes, often used to maintain smooth flow in a pipeline. A bushing, on the other hand, is inserted inside a larger fitting or pipe to step down to a smaller size. The smaller pipe fits into the bushing, making it a more compact solution.