Generally speaking:

NOBLES: are those individuals who possess a coat-of-arms granted or confirmed by a sovereign power.

TITLED NOBILITY: are those nobles who posses a title granted or confirmed by a sovereign power.

PEERS: (in the UK only) those nobles who currently sit as members of the House of Lords, the upper chamber of the British parliamentary system.

In Great Britain the titled nobility is composed of the following ranks (in ascending order): Baron, Viscount, Earl, Marquis, Duke, Prince, and Sovereign. (There is a sort of half-step between the knightage [those individuals the Sovereign has chosen to favour with the dignity of knighthood] and the other titled nobles known as Baronets. These individuals are entitled to the hereditary right to prefix their name with the honourific "Sir", with precedence over knights bachelors, but after barons seated in parliament.)

When Scotland and England became united, all Scottish titled nobles were granted a seat in Parliament. This included all of the Scottish feudal barons, who were great in number. To prevent the Scots from having a majority in the newly constituted House of Lords, it was decided that the feudal barons would come together in convention and elect from among themselves representative "Lords of Parliament".

Those not elected (and many chose to have nothing to do with the system of joint rule) retained their styles and dignities as barons. Because, at the time, Scotland was a strictly feudal country (and in some ways remained so until the present century) all baronies (and some superior titles-- that of Earl, for instance) were subject to feudal law which allowed them to be "freely disposed of" at the whim of the holder as they were, again until quite recently, tied to a specific piece of land.

Interestingly, those titled nobles who have now been deprived of their hereditary right to a seat in the House of Lords are no longer, in the strictest sense, "Peers", but rather have reverted to the status of titled nobles, in much the same way their continental counterparts comprise a similar social class in their own country.

As an aside, Scotland is not alone in having a feudal baronage as the practice existed in England and Ireland as well, examples being the Barony of Alton (as distinct from a manorial "lordship") in England, and the Barony of Slane, in Ireland. On the continent, and especially in France (from which the system of titled nobility was imported into the whole of the British Isles) the foundation of all titles of nobility is a feudal holding, ie: the possession of a feudal barony.