describe the term differentiation with reference to the production of erythrocytes and neutrophils?

Differentiation is the specialisation of cells as they develop. Thus erythrocytes and neutrophils are both derived from stem cells in the bone marrow but in the differentiation process different genes have been turned on and off in the two types of cells resulting in two different cell types with their own unique function - red cells for oxygen transport and neutrophils for phagocytosis.

Thye same applies to the development of xylem and phloem from cambium - due to different genes being turned on and off in the two cell types.