Difference between Severity and Priority of a defect has been the most common question. “Priority” is associated with scheduling, and “severity” is associated with standards.
My interpretation of “Severity” is how severe the bug is with respect to the system, the user and the business. So this is the impact of the bug that you find, with respect to the system, which could be something that has minimal impact, such as a spelling issue in a paragraph of text, or something more severe such as an application or server error screen that appears when clicking a button/option.
Priority on the other hand, is the importance that the defect is fixed from the business perspective. Defect Priority determines the order in which defects will be fixed/resolved and retested. So in effect, this is setting a level of importance in which the defect should be fixed purely from the context of how it affects the business. I see this as being a business decision, so testers might not necessarily set this, or they might, but with the intention of updating this after discussions with the Test Manager / other members.Business Owner of the solution impacted should prioritize the defect in terms of the urgency it needs to be fixed/resolved.
Once defect is raised it should be reviewed (whether it’s a valid issue and not a data discrepancy/user error, etc) and relevant severity should be specified coordinated by Defect Manager/Coordinator or self-assessed by QA Engineer.