I'm interested in this as well. The only explanation I've found is that xsd:include is used for intra-namespace inclusions, while xsd:import is for inter-namespace inclusion.
Use xsd:include brings all declarations and definitions of an external schema document into the current schema.
Use xsd:import to bring in an XSD from a different namespace and used to build a new schema by extending existing schema documents..
Use xsd:include to bring in an XSD from the same or no namespace.
Use xsd:import to bring in an XSD from a different namespace.
Direct quote from MSDN: <xsd:import> Element, Remarks section
The difference between the include element and the import element is that import element allows references to schema components from schema documents with different target namespaces and the include element adds the schema components from other schema documents that have the same target namespace (or no specified target namespace) to the containing schema. In short, the import element allows you to use schema components from any schema; the include element allows you to add all the components of an included schema to the containing schema.
Another difference is that <import> allows importing by referring to another namespace. <include> only allows importing by referring to a URI of intended include schema. That is definitely another difference than inter-intra namespace importing.
For example, the xml schema validator may already know the locations of all schemas by namespace already. Especially considering that referring to XML namespaces by URI may be problematic on different systems where classpath:// means nothing, or where http:// isn't allowed, or where some URI doesn't point to the same thing as it does on another system.
Code sample of valid and invalid imports and includes:
Valid:
<xsd:import namespace="some/name/space"/>
<xsd:import schemaLocation="classpath://mine.xsd"/>
<xsd:include schemaLocation="classpath://mine.xsd"/>
Invalid:
<xsd:include namespace="some/name/space"/>
Source: Stackoverflow.com