Revenge implies a more emotion-driven response. Revenge is spiteful. Retaliation can mean that, but it can also be used to describe action taken pragmatically or more rationally.

I agree with Mike that revenge is emotional whereas retaliation is more rational, but I want to add one thing. I think that, as a result of revenge being emotional, the level of damage done can be much larger than the initial damage. If you hurt my brother, I will hurt your entire family. Since there is more logic behind acts involved in retaliation, it is more likely to be equal damage. If you hurt my brother, I will hurt your brother.