found this....not sure how true it is as i dont know the breeds very well

The Lhasas are usually a little bigger than the Shih-tzu and have a longer nose and smaller almond shape eyes, they also have a smaller bone structure (Shih-tzus are built a little more solid for their size). The main difference is their character. Lhasas are happy, assertive little dogs that are chary of strangers; whereas the Shih-tzu are outgoing, happy, affectionate, friendly and trusting towards all (mine don't know a stranger).

Lhasa
The coat should be heavy, straight, hard and very dense. The texture should not be woolly or silky. The head should have heavy "head furnishings," and the ears should be heavily feathered.
The shape of the head should be with a narrow skull, falling away behind the eyes in a marked degree, not flat, but not domed or apple-shaped, with a straight foreface of fair length. The nose should be black, and the length from tip of nose to eye should be roughly one-third of the total length from nose to back of skull. The eyes are dark brown, neither very large and full, nor very small and sunk.
The Lhasa's feet should be round and catlike, and well-feathered. The tail, also well-feathered, should be carried well over the back in a screw, andthere may be a kink in the end of the tail. A "low carriage of stern" (tail) is considered a fault in the breed.

Shih-tzu
The general appearance of the breed is that of a small, compact, sturdy dog with luxurious coat, upright head, jaunty step, and plumed, curved tail flowing over the back. Ideal height is nine to 10.5 inches at the withers, but ranges from eight to 11 inches.
The head is round, broad, and wide between the eyes, and in balance with the rest of the dog. The dark eyes are large and round; the ears are natural and heavily feathered; the muzzle is square, short and unwrinkled, and flat; lips and chin should neither protrude nor recede. The jaw is undershot -- the incisors of the lower jaw overlap the incisors of the upper jaw.
The Shih Tzu body is slightly longer than tall, its legs straight and muscular, and its feet firm and well-padded.
The lavish double coat is the breed's crowning glory. A well-groomed Shih Tzu in natural coat is a picture of perky elegance with flowing tresses framing an impish face and body hair brushing the floor.

 

You can be forgiven for having difficulty with this.

The Lhasa Apso and the Shih Tzu and the Tibetan Spaniel and the Tibetan Terrier as well are all from the same 'lion dog' landrace that developed in Tibet. Pekingese also overlapped here as they were a refinement, but also made it back to Tibet. There are Pekingese dogs in the KC foundation stock of the Shih Tzu.

Originally these breeds, even with the KC, were all registered as a single breed called 'Apsos'. The splits into the different types came after the fact. Since they've been refired you can pretty much count on the differences listed above - but there is still overlap in temperaments. I've yet to meet an unfriendly Shih Tzu myself, but I have heard of them. The Lhasas and Tibetan Spaniels I've known have been aloof to strangers - not wary, but they just show no interest.

If you have an interest in the historical development of these breeds here are some links with some quoted material to get you started.

"The Peking Kennel Club was formed in 1934 and held its first international breed show that year. Lhasa Apsos and Lhasa Lion Dogs were entered and judged together, with clearly there being confusion between the two breeds. A standard for the Shih Tzu was developed by 1938, with the help of Madame de Breuil, a Russian refugee." - http://www.petwave.com/Dogs/Dog-Breed-Center/Toy-Group/Shih-Tzu/Overview.aspx

The Shih Tzu (pronounced Shid Zoo in singular and plural) comes by his regal attitude quite honestly, for he was developed as a favored pet of Chinese emperors of the Manchu Dynasty from the middle of the 19th Century. But his history begins centuries earlier, as one of Tibet's "lion dogs," an exclusive group of dogs bred by Buddhist monks that includes the Lhasa Apso and Tibetan Spaniel. In 1850, as was their custom, the monks sent several of their treasured temple dogs to Manchu emperors in Peking, and the Chinese called these dogs Tibetan Shih Tzu Kou, or Tibetan Lion Dog. The dogs were bred specifically to please the emperors in each palace, and type varied.

In 1908, the Dalai Lama, Tibet's spiritual leader, sent some small dogs of Shih Tzu type to Tzu Hsi, Dowager Empress of the Manchu Dynasty. The Empress was a renowned breeder of Pekingese and added the Shih Tzu to her interests. At this time, three types of dogs were bred as palace companions with little difference in type but with different coat length. Tzu Hsi closely supervised the initial Shih Tzu breeding to maintain breed characteristics separate from the Pekingese, but after her death that same year, breeding practices became sloppy and cross-breedings with Pekingese and Pugs probably occurred.

For the next four years, there was much competition among the various palaces to produce dogs of the finest coats and colors, so breeding practices were tightly guarded secrets and records were not kept. Dogs of poor quality were sold in the marketplace, and dogs of fine quality were often smuggled out of the palaces and given as gifts to foreign visitors or Chinese noblemen. Breed identity was often confused.

The Manchu Dynasty perished in 1912 when Tzu's successor abdicated to revolutionary forces that eventually established the Communist government in China. Many of the royal dogs were slaughtered during the stormy months that followed.

Shih Tzu found their way west to England when Lady Brownrigg discovered the breed in Peking in 1930. Originally classified as "Apsos," the Shih Tzu was ruled a separate breed by The Kennel Club by 1935. American soldiers stationed in England during World War II became enchanted with the little dogs and brought some back to the US. The breed was not recognized by the AKC until 1969, so those first imported dogs were often registered as and crossbred with Lhasa Apsos. AKC requires six generations of pure breeding after an outcross to establish a breed as unsullied, so the early Lhasa crosses in this country and a deliberate cross with Pekingese in England in 1952 delayed US recognition. - Dog Owner's Guide Profile: The Shih Tzu

"There are Apsos and what are known in the West as Tibetan Spaniels everwhere…. In every colour, typical of the breeds as we know them, but only a few Apsos have been brushed … As soon as I arrived in Kathmandu, I was contacted by Mrs. Prabka Rana who is trying to get the Apsos and the Spaniels sorted out and registered with the Kennel Club… Ama Rana certainly knows her dogs and we spent an interesting time inspecting the various specimens to decide which were reasonably pure. She explained, as did most Tibetans, that they do not recognize the spaniel as a separate breed, and it is called a short-haired Lhasa Apso (emphasis added). They frequently mate the two together and all efforts to prevent this practice have failed . . . The answer is always the same. "It's our breed and we should know." - :: The Dutch Lhasa Apso Page ::

"The smooth and the long haired coat are one and the same dog, which throws huge questions out as to how the Lhasa Apsos (long haired) and Tibetan Spaniels (smooth coats) becames separated and why. An English show/breeder told me that in the 1950s her friend was there when dogs arrived into England from Mr. Tenzin Norgay's Breeding Programme and they were sorted into 'short and long haired' dogs and given separate names. However, furthering on that, I have seen smooth and long haired Apsos treated exactly the same way by the Tibetans and also LARGE and SMALL ones. We have called the large ones Tibetan Terriers! It is true that the Tibetans prefer the small long haired dogs as fancy gifts for people, but they also adore the funny, frisky nature of the smooth coat, as it a feisty little dog and different from the long haired." - Original & Modified Lhasa Apsos

"It was during this important decade of the Shih Tzu in England that the controversial Pekingese cross was made by Freda Evans who, in addition to breeding Shih Tzu, was a well known, active breeder of Elfann Pekes.

As a result, this acknowledged cross, and many others which undoubtedly made in England Surreptitiously and without record, introduced the bowed leg recessive into the genetic structure of the Shih Tzu. On the positive side is the fact that Shih Tzu twenty years after the cross was made were more uniform in size. Yet bowed front legs continue to appear and persist in many lines today.

. . .

The Pekingese selected by the knowledgeable Miss Evans, Philadelphus Sut-T'son of Elfann, was an excellent specimen in every way, except one-he had straight front legs! He was bred to Elfann Fenling of Yram.

In England the third generation of offspring or F3 from the original cross was recognized by the Kennel Club and could be shown.

Three bitches and two dogs were third generation offspring of the Pekingese-Shih Tzu cross. This generation was bred by a Miss O I Nichols of Devon, who owned the 2nd generation cross-bred dam, Yu-Honey of Elfann. Two of the three bitches, Michelcombe Dinkums and Michelcombe Fucia remained with their breeder, the third bitch, Elfann Shih-Wei-Tzu was transferred to Mrs Murray Kerr in Scotland. The dogs were Ti-Ni-Tim of Michelcombe, transferred to Mrs Widdrington in England, and Mu-Ho, registered by Mrs Thelma Morgan of the Midlands.

The progeny of these F3 offspring were distributed throughout the country, so that before long it became almost impossible to find foundation breeding stock that was not directly or indirectly the result of the Pekingese cross." - Pekingese Cross

CC

 

I had a lovely true to breed standard Lhasa Apso.
She was so laid back, nothing phased her. She would be like a puppet dog all day, until feeding time and walkies. You could do anything with her and she was always so relaxed, never snapped or growled, or wriggled to get away.
Very self -confident but with no aggression at all or nervousness.
Loved all creatures, including cats and mice.
Compared to a Shitzu, her body was longer and very supple, more like a cat, as her movement proved.
Shitzu have a shorter back and compacter build, with a larger head, broader and shorter nose, and larger big round eyes. And are more lively. Probably why more popular than Lhasas.
True to breed, my Lhasa was stubborn, but only while running free she would not be recalled. She did that herself when she noticed we were far off, but only when she wanted.
She loved running for short distances, but could not swim!!
She had brilliant hearing and was the first of my other Westies, to hear the sound of a stranger approaching. Just a calling high pitched bark twice, but did not move from the settee. Unlike the Westies who charged to the door looking for the danger and charged outside to ward off the danger in a frenzy.
My Lhasa remained as relaxed as ever - frenzy just not in her genes.

She was not , as the breed standard says, suspicious of strangers. Very friendly with everybody. Not a hunting dog and was not interested in chasing a ball.
A real lap dog.

 

A lhasa is slightly bigger has a longer snout and less boggle eyes, thifss is the easiest way to tell the diferance

 

My Lhasa was small, as I have seen bigger ones. Her length of snout was just 3cms and she weighed 6 kilos. Also she had shorter legs than others I have seen.
She did not have boggle eyes, but were round. The Shitzu I have seen had larger eyes but not boggle, and don't find boggle eyes attractive. My Lhasa's head was definitely smaller than a Shitzu.
Both are lovely dogs, as most of the Tibetan breeds. The Tibetan Terrier is the biggest and livliest and very friendly

 

the dogs in my siggie pic are all lhasa apsos, it can be hard to tell some apart sometimes, yes the main obvious differences are in the face and head but I've seen some apsos that look exactly like a shih tzu... with googly eyes, short muzzles and broad rounded skulls. I always thought our Tux looked a tad shiddie and he was never 'my type'. His colouring didn't help but I have noticed that many with his colouring have that same look about them.