In Simple words .. if you want to take your widget like TextView, EditText far away from other. You should use margin from top,right,left,bottom.
By increasing padding it will increase the inner spacing not making the widget far apart from others..
Like buttons, for example, the characteristic button background image includes the padding, but not the margin. In other words, adding more padding makes the button look visually bigger, while adding more margin just makes the gap between the button and the next control wider.