This article was written by Veronica Hull of Telvara Cavaliers, and explains what it means to be a hobby breeder versus a Puppy Farmer (Puppy Mill), a Backyard Breeder or a Commercial Breeder. 
WHAT IS?

....A PUPPY FARMER (PUPPY MILL)?   
They run an establishment which concentrates on the mass breeding of all the popular breeds. They do this on a shoestring budget, spending as little as possible on food, bedding, vet bills, and nothing at all on health testing, while reaping as much profit in the bank as possible. When breeding stock are 'surplus to requirements' they are disposed of. There is no love of the breeding animal, they are purely there to put money in the puppy farmer's bank.

.....A BACKYARD BREEDER?
Is someone who breeds for 'pin money' from KC (un-endorsed) registered  animals bought from puppy farms or pet shops. They are ignorant of health issues, have no equipment, but very often will purchase a couple of pet females and one male to 'serve' them.... which they do on a very frequent basis.  They breed with no restrictions, and sell with either no KC Papers, or with no breeding restrictions on the puppy, so buyers can also breed from the pet they buy. Sometimes these people work in groups so they can use each others' 'stud dogs' cheaply, they ruin breeds and have no interest in being educated because they are quite happy to sell untypical, sickly puppies to the unsuspecting public who think they are getting a bargain.

.....A COMMERCIAL BREEDER? 
Can be a reputable breeder who tests for everything and cares deeply about the breed they own. The difference is they live from the profit of what they breed,  and from stud fees.... Breeding and selling puppies IS their day job that pays the mortgage. They breed frequently, and have many puppies to chose from and are sometimes very successful in the show ring. Several commercial breeders are also respected judges and can belong to breed clubs. Very few commercial breeders have dogs on their sofas, and hardly ever keep their old retired dogs because old dogs cost money, and they are on a budget.... So they find a pet home for them to live out the rest of their lives in comfort.

.....A HOBBY BREEDER? 

These are the breeders who have their dogs around them in the home, on the sofas, armchairs, and in the bed. They are the ones who spend top dollar on the best food they can get, and buy new comfy dog bedding at every opportunity. These breeders health test, many judge and belong to Breed Clubs. They very often show,  and will travel anywhere to use the best stud dog to produce their next healthy litter,  while hoping for something to be good enough to show. The rest of the litter is placed in carefully vetted pet homes. They are surrounded by their beloved oldies, and are bereft when they pass.... They forever have their hand in their pocket,  and don't make a buttered bean in the way of profit....
I cannot possibly say it better than Ms. Hull did. My dogs are my pets, my constant companions and buddies. They bring me joy, laughter, exercise, love and devotion. I cook people grade food for them, I learn all I can about them, I train them to be calm and well-behaved members of the household. At the moment (December 2013) I have three dogs: a 4.5 year old female, Bonita, and her two daughters: 1.5 year old 'O de Chanel', and 6 month old 'Rosa-Lia'. 
One male pup (neutered) is my son's pet, another male (2013's "Cicero") went to a Nova Scotia breeder and I have high hopes he will be a great show dog, and later on stud dog for her. I also try to stay in touch with the families who have bought the other 5 puppies Bonita has produced. I do not own a stud male, and have no intention of getting one in the near future; that is just too difficult in a regular city household.
My dogs share the house with 4 Abyssinian cats. To avoid nighttime cat chasing, the dogs sleep together in the kitchen and the cats sleep where they wish (usually with me). I use XPens to keep the dogs from eating each other's or the cats' food, but they do not live or sleep in cages.
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P.S.
One category of people not mentioned by Ms. Hull is the animal hoarder... These are folks whose lives have taken such a turn that they have lost perspective and touch with reality. They gather more and more animals, often believing they are rescuing them, only to fail miserably in providing even basic care for them. They over extend their finances and at best are able to only provide food and a roof over the animals' heads. Thus they do harm to the animals and their well-being instead.
They often refer to the animals as their 'children', but fail to recognize it when the animals need medical attention. They fail to spay and neuter and they fail to clean up after them. Their homes may end up destroyed by the animals due to their sheer numbers and the people's neglect.
How to recognize a hoarder? 
- They often don't know how many animals they have
- They often live in filthy conditions, accepting animal feces and urine throughout the home as part of owning pets 
- They have many animals in ill health
- They do not notice the animals' suffering
- They do not take them to a vet, often medicating with OTC meds for conditions they are not knowledgeable about and unqualified to treat for.
- They do not provide balanced care to the animals (not enough attention, not enough food, mediocre/dirty shelter, animals are caged or tethered/chained, no medical care, no testing, no vaccinations) 
If you happen to know such a person, please report them to your local animal control or humane society without delay. The people need help and support, and their animals even more so.