Well these are terms where the usage differs between US and British English.
In the UK we would say something like: 'We're going on holiday next week' to describe a recreational trip, which typically are taken during the summer.
You would be hard pushed to find any British people using 'vacation' to describe a trip like this. In US English they would say:
We're going on vacation next week.
I think in US English they distinguish it this way. A vacation is something you decide to do e.g. you decided to take a trip abroad. A holiday exists either way and is planned by someone else e.g. a national holiday, a school holiday. If I'm wrong, please someone from the US correct me.
Anyway, we don't really use 'vacation' in the UK, of that I am sure.