I think this is an U.S thing where this kind of division has sprung up - so you have
contractor ("temp", "paid less")
full-time employee
consultant ("paid more")
We also still have a very very strong consultant labor force making 2-3x what W2 full-time employees can pull in. These consultants generally work through smaller consulting firms that take smaller cuts for the placement/handling billing and invoicing.
Perm - Mid level benefits + Pay (maybe options in a startup)
Contractor - Individual with their own Ltd company, pays less tax and much higher take home pay but without any benefits.
Consultant - On-site via a supplier on a framework of some kind, however, often a permanent employee of the supplier with the supplier cashing in the margin.
At least 50% of the tech workforce in companies I work with or where peers are at in London are made up of contractors, especially in Banking.