Speaking of Stephen Sondheim, on this day in 1819, Jacques Offenbach, who most consider the "inventor" of the operetta, was born in Cologne. The operetta (literally, "little opera"), differs from a full-blown opera because there is often acting, or moments where the libretto, or text, is spoken between songs. An opera libretto, of course, is sung straight through.
And while you probably haven't heard of any of Offenbach's operettas, certainly you'd recognize HMS Pinafore or The Pirates of Penzance, by Gilbert & Sullivan. So what's the difference between an operetta by G&S and a musical by Sondheim? A musical is a play with songs interspersed, while an operetta is a musical with dialogue interspersed.
Props to Jacques Offenbach for starting the evolution which ultimately led to the "Great White Way."