What's the difference and if I have both on does it cancel out the other? I had both on before and my phone never turned off the data connection, so I was wondering if having one or the other would definitely work?
Yep both work together. Sleep mode turns cellular data off during long periods of inactivity, so if the phone's not being used and it's not using data, then it goes to sleep mode.
Power saver is pretty useful. It lowers brightness and CPU power and it you can also set it to disable data when screen is off but you still receive notifications (it's magic I tell thee).
I use power saver during the night when I don't want to turn off data or when I'm outside and don't have much battery remaining.
Also if you open up the power save option you can turn certain things off. Like screen brightness and mobile data. So it gives you some nice options. I manually turn my mobile data off when I have crap signal or dont need it to save battery. So power save for me is ONLY used for the CPU when I need to save battery life.