I won't quote the spec sheets to you as they are readily available and easy to read. From an Owner standpoint I will advise the purchase either package depending on your intended use. THAT will be your most difficult thing to research. Good luck.
Naked means no accessories, while the Hero 3 is the latest version of the camera (Hero HD, Hero2 HD, Hero3). You can probably buy the "naked" version in all series. Make sure you realize there are THREE versions of the Hero3 (black, silver,and white - all with different capabilities)
There are quite a few differences. If you were to give them "generation" numbers, this product (Hero HD/HD Hero ["Naked" is just in reference to the accessories that it comes packaged with, i.e., none]) would be a generation 2 while the Hero 3 is generation 4. The Hero 3 is, I would say, significantly smaller. It has wifi built in on some models, more modes and options, and capabilities to be run by a remote. I don't think the HD Hero can work with wifi (or I would have bought it already) and it is somewhat limited in options as far as multi picture modes. Both are compatible with 3D housing, dive housings, all the mounting accessories. You can probably pick up a used HD Hero from someone looking to "upgrade" for fairly cheap.
Oh man there are tons of differences. Check the stats/features pages for each item, the Hero 3 has it all; built in Wi-Fi, video streaming and more. Plus, it is tiny! If you just want a bare bones camera to film with though the Hero Naked may be your best bet. They do not make this camera anymore so it should be rather cheap. Plus you can always just buy any accessories or mounts you may need.