I guess the big difference is the level of interaction. A Mercurial extension has access to all the functionality that Mercurial offers: applying patches, creating commits, history walking, etc. But it doesn't really modify the underlying representation of that data (queues store their data in the working copy, for example).

Git doesn't give you access to its functionality but instead gives access to its data model. Stashes are just references, commits are created or destroyed at will, notes are just objects that point at commits and are stored in a different set of references, etc.