The simple explanation: Logical history - what you see when you do "git log --all". Physical history - doing "git log --all" every time a repository updates and then storing each output as an entry into another history log. Kind of a "history of histories"

The complex explanation: a git repository at a particular time consists (mostly) of a graph of commits. This graph represents the logical history of code changes in the repository. The graph can be updated in an append-only fashion (using commit/merge/revert) or in a destructive way like with rebase and reset. The physical history is simply the history of the graph over time.