"Discharge Simplicitor," as it is technically known, is used in cases of loss of confidence, prolonged illness, or any such similar grounds. In such cases, a domestic inquiry is not instituted. The employee is given a letter called "Discharge Simplicitor" and relieved from his/her duty. There is no stigma attached in cases of discharge.
Also, you do not discharge a person upon resignation or superannuation. Normally, you "relieve" a person under such circumstances.
"Dismissal" happens after following the due course of disciplinary proceedings – charge sheet, domestic inquiry, etc. It carries a stigma.
In certain specific cases, gratuity may be withheld while settling dues in full and final.
Vasant Nair