In the UK, usually only the term “icing” is used.
In America, “icing” is used colloquially, but people tend to use frosting in writing, because it sounds like a more proper word. Fannie Farmer (The Boston Cooking-School Cook Book. 1918) used the word frosting over 30 times to mean both thin and thick toppings, and used the word icing only once. The Joy of Cooking (1964 edition), however, didn’t use the word “frosting” at all; it used “icing.”
Canadians tend to use both icing and frosting interchangeably. However, if anything, they tend to think of frosting as being thicker, because commercial frosting in tins (such as Betty Crocker) is thicker and is called “frosting.”
In some North American minds, a difference between the two terms is emerging. In this thinking, frosting is fluffier than icing, and has more volume because air is whipped into it, and won’t dry hard like icing. Icing is more like a glaze, is thinner, isn’t whipped, and will dry harder.
Debate over which word to use isn’t very heated, perhaps because people don’t want to reveal their own uncertainty. They will debate, however, whether butter or shortening is better to use. While butter gives better flavour, it will influence the colour. Shortening, being white, won’t influence the colour as much as butter will and holds up better in warm weather. And while the trans-fats in shortening are a downside health-wise, they do make it a bit easier to work with than butter because it is always the right consistency.
Quick icings are made with room temperature ingredients; boiled icings used a hot sugar syrup. These two groups can also be referred to as cooked or uncooked.
The word frosted is also used to mean a thin icing glaze, as in a frosted doughnut, or to apply frosting or icing.
Icing actually existed before frosting, probably as early as the 1600s. It was a cooked granulated sugar and egg white mixture spread on cakes and allowed to harden so that it resembled ice.
Frosting recipes, based on butter, cream or milk, and powdered icing sugar started to appear at the start of the 1900s.
Literature & Lore
There is an expression, “well, isn’t that just the icing on the cake”? To Brits, Canadians and Australians, that means “that’s the last bloody thing we needed”. Americans, however, interpret it to mean that a bonus extra is coming their way. You could say either that they always look on the bright side, or that they are a people on whom irony is lost.