This paper advances the concepts of induced polarization differential effect and IP difference and gives them definitions. It is for the first time that the term differential IP method is used. The application of this method to water-poor and water-rich areas in plains or mountain regions and the in-house water trough simulation experiments on metallic plates, graphite plates and specimens of metallic minerals and carbonaceous rocks prove the effective-ness of the differential IP method based on the induced polarization differential effect in groundwater exploration and ore prospecting as well as in the distinction between ore species. A preliminary discussion is also made on the regularity of anomaly reflection. The method is simple and can distinctly reflect anomalies; hence it might be used in productive activities.