As Lowell stated, LEN() will only return the number of characters in a string (with a caveat that I'll explain in a minute) whereas DATALENGTH will return the number of bytes in a string. Generally speaking, Unicode strings will have 2 bytes per character in SQL Server.
The caveat that I spoke of is that LEN() will NOT find/report on trailing spaces (and certain other characters) but DATALENGTH will whether of not it's a Unicode string or not.
--Jeff Moden
Change is inevitable... Change for the better is not.