Actually it is like this: I would prefer to = I would rather I would prefer to have coffee. = I would rather have coffee. The meanings are the same. In spoken English we say" I'd rather...". The "d" is often inaudible. "I prefer something" cannot be replaced by "rather".

Thanks Nightmary, there's some really good explanations there. :) I'd agree it comes down to this: prefer is a verb, and rather is an adverb. You can use "to prefer (something)" but "rather" cannot work alone as a verb: an action always needs to follow rather. Note Tony's and Eliot's examples above.

Here you have 3 good answers: http://www.italki.com/answers/question/56409.htm

"prefer" means that you like something or someone better than another. for example: i prefer apple pie over chery pie. "rather" is alittle more tricky, becuase the meaning depends on how it is used. example: "i rather like reading fantasy novels" the meaning of "rather" in this sentance is that i greatly or preferably like to read fantasy novels, depends on how the other person sees its meaning. another example: "i would rather read fantasy novels than romance novels".. "rather" means the same thing as "prefer" in this sentance. i hope that helps, if you have any questions, please ask, i shall be more than happy to help :)