Storyline quests make you progress through the game. They are the main quests. They get you what you need to unlock each area and world in the Spiral.
Side quests are optional. They are a good way to get XP. You don't need to do a single side quest to get to Malistaire. I highly recommend doing them. You will need all the health and strength you can get for Celestia. It is a fun and challenging world. :D
Storyline quests are what get you to progress through the rest of the game. If you were to have missed one then you couldn't move on to the next area. Side quests are there just for extra exp, gold and equipment. They are optional as to whether or not you do them and do not hinder your progression of the game. If you were to miss one of these, moving on to the next area would not be stopped because of this. Hope this explains it a little better for you!
Storyline quests are required in order to finish each area. All of the storyline quests in each world have to be done before being allowed to advance to the next world.
Side quests aren't required; they are optional and don't have to be done. However, the experience that they give is important, because this adds levels to the wizard, making more spells and better equipment possible earlier than if side quests aren't done.
