[Sethomas]

Well, they're two fundamentally different things, it's just that when the general population looks at certain forms of existentialism they see its manifestations as appearing too much like nihilism.

In short:
Nihilism is the principle that human endeavor is void of purpose and is generally incapable of creating purpose.
Existentialism is a manner of thinking centered around the idea that life contains no intrinsic or immutable purpose, but the experience of life affords us the opportunity to invest in it any significance of our liking.

When Existentialism was about a century old, Sartre produced a number of essays attacking the criticisms leveled against Existentialism. His thesis was that Existentialism is simply the assertion, "existence precedes essence", or more plainly, the only instruction books we have on how to live are the ones we write for ourselves. He even attempted to throw it back into their face with the idea that Existentialism in its more highly evolved form is closer to Humanism than Nihilism, but I don't remember how he did it because I wasn't particularly impressed with his logic.

One big problem causing the association between the two was the struggle WITHIN the existential movement, whereby its theistic camps leveled the charge of nihilism against the atheist variety spearheaded by Sartre. Sartre, by his efforts to unify Existentialism from a collective of meditations and observations into a systematic methodology of thought, eclipsed the rest of the movement in the public eye. The earliest Existential philosophers (excluding Nietzsche, whom I've never known to use the term and its applicability to him is something of a debate) most always approached the subject from a theistic context, especially the theodicy explored in Kierkegaard's Fear and Trembling (he was a Lutheran advocate of the Christianity of idealism opposed to Christendom of reality) to Dostoyevsky's metaphors for humanity's relationship with God within Crime and Punishment.

By the end of WWI, there was a huge corpus of works by French Catholics dominating the Existential scene, but Sartre dismissed their methods of thinking as being immiscible with his own. Hence, the attacks against his camp for being nihilistic.

Oh, and for future reference, Camus (author of The Stranger) was often labeled as being in the atheist existentialist club, but he flatly rejected it a number of times. He preferred the term "absurdist". Oddly enough, wikipedia's entry on "absurdism" includes a chart outlining tenants of both existential camps, nihilism, and absurdism. I think it's actually well-made, fancy that!