Stock Options are the options to convert into common shares at a predetermined price. These options are given to the employees of the company in order to attract them and make them stay longer.
The options are generally provided by the company to its upper management to align management's interests with that of its shareholders. Stock Options generally have a venting period i.e. a waiting period before the employee can actually exercise his or her option to convert into common shares.
A Qualified option is a tax-free option which means that they are not subject to taxability after the conversion. An Unqualified option is a taxable option which is taxed immediately after conversion and then again when the employee sells the stock.