All of the differences between graphite and diamond are the result of the difference in their respective structures. Graphite has a sheet like structure where the atoms all lie in a plane and are only weakly bonded to the graphite sheets above and below. Diamond has a framework structure where the carbon atoms are bonded to other carbon atoms in three dimensions as opposed to two in graphite. The carbon-carbon bonds in both minerals are actually quite strong, but it is the application of those bonds that make the difference.
It may seem strange that one of the softest minerals (and a very slippery lubricant) is the high-strength component in composites used to build automobiles, aircraft, and of course golf club shafts. It is the weakly bonded sheets that slide by each other to yield the slipperiness or softness. Yet when those sheets are rolled up into fibers, and those fibers twisted into threads, the true strength of the bonds becomes apparent. The threads are molded into shape, and held in place by a binder (such as an epoxy resin). The resulting composites have some of the highest strength-to-weight ratios of any materials (excluding, of course, diamond crystals and carbon nanotubes).
Graphite can only be confused with the mineral molybdenite which is metallic bluish silver in color. However, molybdenite is much denser and has a silver blue streak.
Most graphite is produced through the metamorphism of organic material in rocks. Even coal is occasionally metamorphosed into graphite. Some graphite is found in igneous rocks and also as nodules inside of iron meteorites.