What is the difference between an environment and a tenant?

The terms are used interchangeably and mean completely different things.

Tenant

Your organization in the Microsoft cloud. This is where the user accounts are stored, and it is shared across Microsoft 365, Dynamics 365, and Power Platform. Most organizations have one.

Environment

A separate space within the tenant, with its own data, apps, and access permissions. Test and production are separate environments. Data does not flow between them unless someone configures it.

Practical consequence

Users exist in the tenant, but must be granted access to each environment. A new employee who has been given an account will not see anything in Dynamics 365 until someone assigns them a role in the correct environment.