The document vault is simply for document storage, whereas Policies & Procedures has some more features.
The Policies & Procedures area allows you to set an expiry date for your document, as well as have people confirm they have read the document and track their readership.
This is important for policy documents and risk assessments which must be reviewed and have a record of who has read them.
Both the Documents Vault and Policies & Procedures area allow users to share the documents with 3rd parties, if your subscription plan allows so.
Each location has a separate document vault whereas policies can apply to a whole organisation.