Officially, there is no longer a distinction between ‘nun’ and ‘sister’ in the Church. The distinction was done away with in 1983 with the promulgation of a new Code of Canon Law under the papacy of Pope John Paul II.
Originally, Nuns were female religious who took public solemn vows of Chastity, Poverty, and Obedience. These were, by definition, the solemn professed members of the Religious Orders, rather than the members of Religious Congregations. So Technically, you could have a solemnly professed nun in a true conventual order working in the world.
Sisters were female religious who took, at the very least, public simple vows of Chastity, Poverty, and Obedience. They may, in fact take solemn vows, but the difference is in how they take them. Some Religious Congregations may take one or two of the three Religious vows Solemnly and the other Simply. The sister may even take the remaining Simple Vows as a Solemn Vows, but it must be made privately instead of publicly because is not a Solemn Vow by virtue of the Order but instead a personal choice.
The reason why this distinction was made was due to the binding nature of simple and solemn vows. Up until 1917, Solemn Vows, could never be dissolved, not even by the Pope. Even if one left the Religious Order, they were still bound by Chastity, a measure of Poverty, and Obedience to the Bishop of their Diocese. Only in 1917, under a new Code of Canon Law promulgated by Pope Benedict XV, could Solemn Vows be dissolved by direct command of the Pope. Simple Vows could be dissolved by a designated member of the Church hierarchy.
As of 1983, the terms ‘nun’ and ‘sister’ are used interchangeably and have no Canonical difference. A great deal of the current belief that there is a difference comes from the ‘New Catholic Encyclopedia’ which has not been largely updated since the change in Canon Law in 1917.