Guns are ranged weaponry bought from the store in the menu. They can range from a small pistol, to a large machine gun. Headshots on zombies and other monsters will cause a red explosion from the head, decapitating the said zombie. Guns have unlimited ammunition, which makes knifes obsolete in most situations. If you're buying guns, and if you're trying to but a good one, read the stats, they will tell you how good the gun is.
Knifes are melee weapons. Unlike guns, knifes are automatically added to players' inventory upon reaching their unlock level. A kill with a knife will cause a red explosion and a missing body part from the slain monster, similarly to the gun's head shot. If you're trying to get a good knife, read the stats, they will tell you more about how good the knife is.