The difference is just the size of the sim .As the name suggests the Nano sim is smaller than the micro sim. They all perform the same function.
You can find more info on what different types of sim are available here.
It's easy to grab a replacement sim if you do not have the correct size for your new iPhone 5. Just pop into a Vodafone store and ask for a replacement. Its free and the staff can help you set it all up also.