You are correct that both models work on the same data without any problem. Both items operate on a matrix of user-item ratings.
In the user-based approach the algorithm produces a rating for an item i
by a user u
by combining the ratings of other users u'
that are similar to u
. Similar here means that the two user's ratings have a high Pearson correlation or cosine similarity or something similar.
In the item-based approach we produce a rating for i
by u
by looking at the set of items i'
that are similar to i
(in the same sense as above except now we'd be looking at the ratings that items have received from users) that u
has rated and then combines the ratings by u
of i'
into a predicted rating by u
for i
.
The item-based approach was invented at Amazon (http://dl.acm.org/citation.cfm?id=642471) to address their scale challenges with user-based filtering. The number of things they sell is much less and much less dynamic than the number of users so the item-item similarities can be computed offline and accessed when needed.