A "RC" is a release candidate. It is considered somewhat of a beta release, almost ready for prime time, most of the bugs worked out, but probably not all.
The "nightlies" are usually compiled automatically by a 'build bot' which includes a new 'repo sync' command thereby updating every current edit that has been merged into the git repository. If there is a skip (or lag) in the dates of the nightly, this usually means that the 'make' failed and the code will continue to be modified to get all the git commits and merges to work together nicely.
I know that wasn't quite layman's terms, so basically the main difference is a RC is just a nightly and/or build that is considered by those maintaining Cyanogenmod for that particular device to worthy of being considered more stable than just a nightly. For me, CM7RC2 was cool, but there was still more I was looking for and am still looking at the nightlies (and actually more to expertontech/winner's builds) for that 'more'