The main difference is distribution yield is based on recent distributions while SEC yield is based on yield to maturity.
Yield to maturity takes into account any premium or discount on the bond. If a bond is trading at a premium, YTM takes into account the eventual decline of the bond to par. Vice versa for a bond trading at a discount. Distribution yield would not take this into account.
Each method has its defenders and detractors.
Distribution yield is typically calculated by dividing actual distributions by current price. The two major methods of computing actual distributions are (1) use the most recent month's distributions and multiply by 12 and (2) use the prior 12 months' distributions. I believe the former is more common. The later is often labeled annual distribution yield or some such.
SEC yield is essentially average YTM over a recent 30 day period. To calculate this YTM:
Divide the yield to maturity by 360 and multiply the quotient by the market value of the obligation (including actual accrued interest) to determine the interest income on the obligation for each day of the subsequent month that the obligation is in the portfolio. Assume that each month has 30 days.
Here's the complete definition of SEC yield. http://bulk.resource.org/gpo.gov/regist ... _13961.pdf