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And can they be used interchangeably in some cases.
If possible to give a simple clear example.
Context: is a dictionary which contains some information like: user language, company, timezone, etc by default. You can pass any kind of data/information in context as per your need either from xml or from py (mehtods) and then based on that extra information you can write your process code.
Domain: is a condition(s) which is used to filter your data or for searching. For more information about domain see this: How to filter datas in OpenERP using domain list.