In COA, circuits are divided into two categories based on how they process data:

• Combinational Circuits: Output depends solely on current input values. Examples include adders, multiplexers, and decoders.
• Sequential Circuits: Output depends on current inputs and the circuit’s past states. These circuits incorporate memory elements, with examples including flip-flops, counters, and registers.

The primary difference lies in memory dependency; combinational circuits have no memory, while sequential circuits retain past states to affect future outputs. This distinction is crucial for understanding various processing tasks within computer systems.