What is the difference between rendered entity and content in views 3?
At a guess...

The "Rendered Entity" format is available so any type of entity can be rendered. The "Content" format is only available for nodes, and as such can't be used generically.

Nodes are entities (as are users, taxonomy terms, and a whole host of others provided by contrib modules) and so just happen to be one of the 'items' that the "Rendered Entity" format can handle.

It also happens that Views already implements a format specifically for nodes ("Content"), so it does kind of look like there's repetition; but in reality it's not repetition at all, they're two separate things that just happen to have a bit of crossover in functionality.