When it comes to serial objects I think one of the big differences are the “feature” of taking inventory part into object or object into stock to ship it. 
functional object won’t do that as far I know. 
 

in apps 10 both serial and functional objects can be moved around. In 8 it was only serial. 
 

that said when I was checking out the functionality my biggest challenge was moving serials properly between sites. Objects have 2 sites but only one actually moves. Combining this setup with the Oil and Gas extension package (replication) and you would see really strange results. 

Agree with Julian. Serial site change is a mess in IFS.

In a simple setup with a few manufacturing companies and multiple service companies/sites it is necessary for all users employed in the service companies to have access to all manufacturing sites as well. Otherwise they will not be able to see the serial structures of the manufactured parts. In my opinion it is a major design flaw in IFS that serial objects have site being part of the key. 

To answer jhooperyans question, a simplified way to think about serial vs functional  is that replaceable objects should be serialized and non-repleaceable objects should be functional. 

Example: A functional structure could have this structure

Site->building->Floor->room number

Then each room is contained uniquely in a floor in a building on a site.

Inside that room you can then have serial objects (workstations consisting of serialized screens, serialized laptops and docking station,  or production equipment etc)

A Functional Object is possible to move to another place in the facility as per the requirement. A Functional Object's Object Level should reflect its location or position in the facility. It can be a building, department, room or a sub system of a facility.

Objects that must be mobile within the facility, should be established as Serial Objects.

Serial Objects can be moved between different locations within the facility, and can also be moved into Inventory. Because the Serial Object can be moved, you may want to view it’s History.

Even though Functional objects are used to identify non movable equipment, we may define the equipment that are hardly moved around as functional objects too.

To handle the movements of Functional Objects it has been introduced a ’Move Functional Object’ option. This is enabled for the Functional Objects that are defined with Belongs to object. Details pertaining to movement is saved in Journal as new journal entry. t is also possible to define the inherit Cost Center with the movement of the Functional Object.

A Functional Object can be a geographical location, equipment that is frequently non-movable or another Object that does not change its Parent Object regularly. Think  customer, a building, department, room or a sub system of a facility.

While Serial Objects consist of a Part Number and a Serial Number. You can always follow the Serial Object Transaction History.

Below is a structure example.

tends to get a little more complicated if you want to have maintenance setup on the objects…. 

so if you check have a room where you check all the PC’s every month you (I) would create a PM-action on the room object(sub location) and add the PC in the object list(IFS 10) …. but then you need to update the object list every time you change the PC (serial object) to exchange the old PC for the new PC you placed in the room ;-(  it would be fantastic if we could get a functionality for “Exchanging” parts they would also be “Exchanged” on object lists