Known as Italian bacon, pancetta is made from the pork belly. It's seasoned and salt-cured and, unlike American bacon, is usually not smoked, although there are smoked versions available. Pancetta is formed into a thick roll and sold thinly sliced or diced. It's usually sauteed and used as a seasoning for pastas, vegetables, braises and other dishes. It can be used in most dishes that call for bacon but will deliver its own unique unsmoked flavor.
Prosciutto means "ham" in Italian and is made from the pork rind leg. It's seasoned, cured with salt and air-dried. Unlike American hams, it's not smoked. Prosciutto is sold in long thin slices that are cut off the whole ham. It can be eaten as is (without cooking), crisped under the broiler or briefly cooked in pastas, vegetables, soups or other dishes.