Cotton candy is sugar that’s been heated hot enough to melt then “spun” into thin fibers. But it never got hot enough to start chemically breaking down. It’s just regular sugar in a different shape.
Caramelized sugar happens when you get sugar hot enough that the sugar molecules start to break down into a whole mess of other compounds, which create the brown colour and a bunch of new flavours. If you keep going it’ll burn and, eventually, break down entirely to carbon.
It’s the difference between cutting vegetables up into sticks (same veggie, different shape) and cooking it.
Edit:typo
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