Internal conflict happens in a character’s head, whereas external conflict is an element outside of the character, such as nature or another character.
Stories need different levels and types of conflict. Not every story needs multiple fight scenes or arguments. A story about self-discovery is going to have less external conflict that an action story, which must have plenty of external conflict to fulfil the reader’s expectations. Without a strong antagonist or force that the protagonist has to work against or overcome, the action would be limited.
Other stories can focus almost exclusively on an internal conflict where a protagonist has a false belief about themselves or the world or another character. Although, most stories benefit from some internal conflict where, at the very least, the protagonist learns something about themselves or their own motivation or character.
Many protagonists have a character arc where they move from one emotional or physical state to another. Some have an internal and an external character arc.
Conflict can stem from the difference between what a character wants and what they need?
How do you set up conflict in your stories? Do you start with an idea, character and then develop the plot, or is it some variation on this?