It's an English language question. As far as I gather, in the Middle ages "design"used to mean something like "craftmanship", while "art" was high arts. Both terms have evolved since then and I am not quite sure how. Not quite offtopic on a type-related forum, because some of us in the East use a multitude of anglophone tutorials to study art and graphic design yet I feel we do not exactly grasp the meaning of the words. E.g. I have never heard an arts professor talk about the "elements and principles of visual design", 10 elements, 5 principles etc. There is no such thing here that I know of. We use books by Bammes.
I am asking because I currently viewed a tutorial about drawing hair and therein was talk about "the design of the hair" - while it's clearly an art lecture (not coiffure, tho').
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To design something is to plan out the form or structure of something and not all designs are artistic, but some are if they are done well.
Not all art is the result of a design process, I'm thinking of stochastic art here, but some art is designed, and some is well designed.
Design is mostly for things that people use and interact with... Buildings - to live in, Tools - to operate, Graphics - to communicate. The "human interface" (with it's cultural aspects) on one side and the functionality on the other are essential in any design.
The smaller the human interface is in an object the more it tends toward engineering. The smaller it's functionality, the more it tends toward art.
The linguistic terms are really blurry so it is confusing, and it gets worst across languages. I assume because Design has evolved to a distinctive "profession" quite recently.
For instance, In English the word 'Design', as Mark said, is referring also, and maybe mainly, to planning, and is used a lot to describe the planning aspects of an engineering work, or any work, and it includes some (the amount here changes) aesthetic aspects.
In Hebrew, itsuv (עיצוב) the equivalent of the word 'design', linguistically almost lack the meaning of planning, and it's direct translation to English is forming, That is, to design is to give shape, it is the part in the process that the shape is being formed, whether it is follows a planning process or not, and it carry it's own intelligence, which is much more artistic in meaning.
So the aesthetic emphasis in the term 'design' in English is much smaller than in the same word in Hebrew, which causes quite a few communication problems. I guess it is the same with other languages.
Although I agree with the answers above, it might not be that easy. Gorgeous frescoes by Michelangelo, a pure example of Fine Art, were designed for communication purposes of the Church, even though people don’t usually put it this way. Portraits often serve the same purpose as ads. Aesthetics in artwork is a tool to catch one’s eyes and communicate the right message.
In one of his talks Stefan Sagmeister said that pure functionalism is not relevant anymore, nowadays beauty is a necessary part of functionality. If something is not beautiful it doesn’t work (unless it has to be ugly).
The topic is quite interesting when it comes to typography and type design. Every possible functional problem has been already solved – we have fonts for any size, any medium, any mood. Set anything in Caslon or Helvetica and you’re good to go. So the best we can do is to expand aesthetics, which is the goal of… art, isn’t it? Therefore type design nowadays is actually [beautiful] art, not [functional] design