I have been reading up on this, and it seems that if you use ajax you can only bring in content that resides on the same domain whereas with an iframe you can bring in content from any domain. Is that the case? What other differences are there?
Bear in mind they're two completely separate technologies.
A (i)frame really loads a complete HTML page in area into the browser. Whether the page is on the same or another domain, for pure viewing, doesn't matter.
To a certain degree you have all freedom you want. You can have an (i)frame on a page, still make a Ajax call and decide to load another URL into the (i)frame. Or use the Ajax return value to generate new HTML dynamically inside the (i)frame. Or outside, in another document.
The security restrictions applying in this case is called "same origin policy".