  Linear income usually comes in the form of a salary-working for someone else. You rent yourself out to some employer, usually on an hourly basis. One unit of your time yields one unit of money—X number of dollars per hour. We call this type of money linear income because you only get paid once for every hour you work. If you want some more linear income, you need to put in another hour of work. If you stop working, the stream of money also stops.
Residual income usually comes in the form of profits—earned when your money is invested wisely. Instead of renting yourself out to some employer, the goal is for you to rent out your money to do the work for you.
The power of residual income is that you get paid multiple times for every hour you work.
Source: Cash in a Flash: Fast Money in Slow Times
by Mark V. Hansen and Robert G. Allen
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