The difference between these two is in the way National Insurance (NI) Contributions are calculated. Generally, a director's NI is calculated on a cumulative basis (unlike in the case of employees where the NI is calculated for that particular periods earnings only).
Director designated as a 'Director' : In the designation Director NI is calculated on an ANNUAL Earnings Threshold basis i.e. until the Director earns more than the Annual Earnings Threshold, no NI is deducted. NI will be charged on any earnings above this limit in the normal way.
Director designated as a "Director as Employee" : In this designation the Director is treated as an employee and his NI is calculated just like an employee until the final month of the tax year when his NI will be adjusted to the annual limits. In both ways the NI amount collected is the same, however WHEN it is collected is different. More details please log on to HMRC website for a more detailed explanation.