It's "PAYLOAD" or simply put, the # of pellets in the shell... For example, I use 3 inch #4 steel going 1550 feet per second for $12/box... I could buy the 3.5 inch shells and throw a little more steel BUT at more than double the price, I just can't justify it... The cheap 3 inch shells work just fine.
So, the bigger shells are not "better", they simply have other applications. Best example is for geese. If I was goose hunting, I'd go with the 3.5 inch shells going 1550 feet per second and shot size #1 or #2. The 3.5 inch shell has more pellets in it because of case capacity...
Cheers
Jay