I have bought domains with both of these companies, and I have to tell you, there is a huge difference. I always thought buying a domain name for a company was a pretty standard process, and that the company you bought the domain from did not matter. I was wrong.
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I have bought 4 domains now with 1and1, and my buddies at work have each bought some from them. They have lower prices than most of the other domain registration companies, but that is about their only good selling point. They are very slow to register the domain, and changing the DNS takes hours and hours. After registering a domain, it takes about 3 days for the domain to actually be usable. It may take more time because the configuration is confusing, and if you have the wrong settings, it adds a day or two.
I have bought two domains with GoDaddy, two .infos for 99 cents each. When you buy the domain, you can change the nameservers so you don’t have to waste time like 1and1 waiting for them to change. Also any change to any settings happens within minutes, so there is no time wasted there. GoDaddy is just an overall better company. And while the prices are a little higher, there are coupons and links to get the price down.
1and1 vs. GoDaddy - GoDaddy wins hands down.


