A Access Point is exactly that, a point of access for your computer to connect wireless to a network. The wireless access point acts as a gateway to connect your computer to other computers on the local network and out to the Internet and they can provide WEP or WAP encryption for data transmission across the wireless portion of the network.
Wireless routers do exactly the same thing as an Access Point, but they add firewall and routing functions for your data. The firewall helps to not only encrypt your data transmissions, but also blocks inbound connections from the Internet from accessing data on your computer in the first place. This is beneficial since it adds a layer of protection before your computer is ever reached, sort of like the moat around a castle wall. Routing will also allow your networked computers to communicate with each other behind the protection of your firewall, without making that data available to everyone else in your neighborhood.