What is the difference between under and below ? Please see which of the sentence is correct. thanks

1. They are playing under or below the house. ( The house is a house on stilts. )
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Do some searches before posting (top right search box in this case for below under)
Read the postings by CalifJim and other gurus in these threads:
http://www.EnglishForward.com/search/pro.htm?q=user:califjim under below
In your specific example, with a house on stilts, I think you could use either but I would have a preference for "below." "Under" suggests closer proximity than "below." If there was only a small place to crawl in beneath the house I would use "under." (I guess it might depend on the height of the stilts -- I'm not familiar with houses on stilts, so I don't know how much space there would typically be.) "Beneath" is another possibility that would work in your sentence. As Marius suggested, the earlier lengthy discussions are well worth reading, especially anything by CalifJim.

Sorry -- while editing this I somehow turned it all into italics, and can't figure out how to undo it. [:^)]
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If the house were situated on a "side hill" (or hillside) "playing below the house" could be taken as "playing somewhat downhill from the house," while "under the house" would always mean "directly under." - A.

Edit. Sometimes hillside dwellings are partially on stilts, but I pictured the house in your example as being on level ground (for some reason).
It should be under or beneath the house-platform. Logically speaking, if the house is on stilts, the open space created by such model of house constructions also forms a part of the house itself. Moreover, if we just say beneath or under the house, without explaining what type of house it is, no body expect the writer will understand.

This is my view.
Generally speaking, below has to do with vertical levels. below is 'lower than'. under usually includes the idea of 'covering' as well as the idea of 'lower than'. under is 'covered by'.
I would choose under for your sentence, but below is also possible. When both are possible, choose under if you wish to emphasize that the location has something which acts as a covering or ceiling (under a blanket, under a table, under a cloud of suspicion).
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A sloping (rather than vertical) example would apply to many of our larger mountains: above/below the tree line. - A. (Our respects and sympathies to all flatlanders.) Also, above/below sea level.

To people who live in hilly country, "the garage is below the house" could mean "beneath the house," or "downhill from the house." - A.
They are playing below the house.
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