The differential backup is just the addition of the differential option, as you have listed. More details here: http://msdn.microsoft.com/en-us/library/aa225964%28v=SQL.80%29.aspx

However, you need to still do full backups. Based on what you are saying, a few hours data loss, you need to do:

- Full backup once a day

- Differential backup every few hours

If you do this schedule:

00:00 - Full

02:00 - Diff

04:00 - Diff

06:00 Diff

08:00 Diff

10:00 Diff

...

through 22:00 for a diff.

That gives you a two hour data loss window. If you plan on a full backup one day, a diff the next, then you are increasing your risk every day, and could lose up to a day's worth of data.