Since Peach and Daisy were both going to be in the same games, the developers had to come up with ways to differentiate the two princesses. While they eventually settled on blonde hair for Peach, Daisy is often shown as a brunette, although she's apparently officially a redhead. Some of her earlier appearances in games with full color showed her with tanned skin, which makes sense considering that Sarasaland seems to be a warmer environment than the more temperate Mushroom Kingdom. The tan didn't last all that long, however.
Daisy is also presented as more of a tomboy than Peach, and more likely to occasionally forgo her princess dress in favor of short shorts that show off her sexy gams. Sexy for a video game sprite, that is. Not that I'm into that kind of thing. {g}
Since Mario has a princess as a girlfriend, it's not too surprising that Daisy and Luigi have been shown to have a mutual interest in each other (despite the fact that Daisy's first appearance was in a solo adventure for Mario). While her relationship to Peach isn't entirely clear, I believe at least one game referred to them as cousins, which makes sense if Mushroom World royalty interbreeds as much as European royalty does. And I think she mentions a father at one point. Maybe her father's sister married King Toadstool, or something like that.
[1] Just out of curiosity, does anyone know the actual meaning of the Japanese term that's translated as "world" in the English versions? They're certainly not worlds in the usual sense of the word (well, except maybe in Super Mario Galaxy), but more like countries, provinces, or just general regions. Sonic the Hedgehog's description of each level as a "zone" makes more sense.