One thing not mentioned in answers is inline element can break among lines while inline-block can't (and obviously block)! So inline elements can be useful to style sentences of text and blocks inside them, but as they can't be padded you can use line-height instead.
<div style="width: 350px">_x000D_
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua._x000D_
<div style="display: inline; background: #F00; color: #FFF">_x000D_
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat._x000D_
</div>_x000D_
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum._x000D_
</div>_x000D_
<hr/>_x000D_
<div style="width: 350px">_x000D_
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua._x000D_
<div style="display: inline-block; background: #F00; color: #FFF">_x000D_
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat._x000D_
</div>_x000D_
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum._x000D_
</div>
_x000D_