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What is the Difference 

When the toymakers of Germany first started to make smaller tabletop model railways they used half of O gauge( not scale )

That is O gauge was 32mm between the tracks and Ho was 16.5mm For more information see the page Scale and Gauge 

The various scales and gauges were somewhat fluid in the early 1920s. O gauge was built to either 1/4 in Scale that is 1/4" to the foot while  others used the so-called 7mm scale a composite scale using 7mm = 1 foot so the scale varied from 1:48 - 1:43 

As things got smaller so too did the models and track

With half of O Gauge being the common smaller track size 

The Americans did for a time use a halfway system  S scale

with a true scale of 1:64

The majority of the world however went directly to Half of O

with a true scale of 1:89 

In the UK the models were too small to accommodate the motors in the British models due to the much smaller size of the prototype so a  compromise was made 

The track remained at half of O gauge i.e. 16.5mm but the models were larger ie 4mm= 1 foot a true scale of 1:72

So OO is a compromise on the track gauge still at 16.5mm but models to a larger scale 

There was a move in the  UK after the war to move to the correct scale but this never took off and so it remains to this day  

Scale and gauge is a complex matter and is ofen confused 

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