"Sedative" and "hypnotic" are descriptions of the effects of drugs rather than descriptions of the drugs per se. In many cases, as Jamesreynolds499 suggests, the same drug can be given in different doses to obtain the different effects.
Sedatives are given to reduce irritability or excitement. Sedation is a continuum ranging from irritable and anxious, to calm, to responsive only to strong stimuli, to totally unresponsive. Some better description here: http://en.wikipedia.org/wiki/Sedation
Hypnotics are given to induce sleep or unconsciousness, for example in general anesthesia. In many cases, this isn't true sleep, with the regular sleep patterns, and does not necessarily refresh our bodies in the ways that normal sleep would. Consequently, many drugs prescribed for sleeping are not prescribed at a level that actually induces unconsciousness, but merely at a mild sedative level that will calm the person enough for normal sleep to occur. Hypnotic doses are usually given either for general anesthesia or for severe sleep disorders, and then only for a short time with a rapid tapering-off period.
The two categories do not totally overlap because some sedatives are too toxic to be taken in doses high enough to cause a hypnotic effect, and some hypnotics are too strong or too disruptive to natural sleep to be used in doses small enough for a sedative effect.
Outside the scientific literature, most people think of sedatives as causing unconsciousness, while hypnotics would be used to make people "suggestible". That is not the way the medical field sees it.