When a material undergoes a transformation, the atoms inside it are either rearranging or reacting to make new substances, these are physical or chemical changes.
A physical change is a transformation with no chemical reaction. For example, when ice melts into liquid water there is no chemical reaction, no new substances – only the state of the water has changed.
A chemical change is when substances undergo a chemical reaction creating new substances. For example, when wood burns it undergoes a combustion reaction to become ash which has a different chemical composition than wood.
It is often assumed that physical changes are reversible and chemical changes are irreversible but this is not always true. Many chemical reactions are reversible such as the Haber Process and some physical changes are irreversible like smashing glass or deforming a spring.
Figure 1 - A Cartoon of a cross-section of the digestive system, the chewing being a physical change and digestion being a chemical change.