Pellets consist of 100% dry (typically less than 10%) natural wood residues which are finely divided, force dried and compressed into small cylinders which easily disintegrate. These cylinders are around 10mm in diameter. They have an extremely high energy density and have better energy efficiency levels than any other fuel.
Compare the costs and other considerations when using wood chip as opposed to wood pellet as a fuel source and compare the use of oil to using wood pellets here in this article.