A state is a political unit. The boundaries of a state are a matter of international agreement (or international dispute) rather than being determined by geological features. A continent is a geological unit. It is a large land mass surrounded by the ocean.
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A state is a political unit within a country, typically with its own government and administrative boundaries. A continent, on the other hand, is a large landmass on Earth, such as North America or Africa, defined by geographical and cultural characteristics. States can exist within continents as smaller subdivisions.
Kentucky is not a continent; it is a state in the United States of America, located in the continent of North America.
Usually there are many countries comprising a continent, however, that is not true of Australia. However the fundamental difference is that a continent is a geological/physical geographical entity while a country is a geopolitical entity.
China is a state, not a continent. It is a country located in East Asia and is the world's most populous country. The continent where China is situated is Asia.
The Persian Gulf is neither a continent, state, country, nor city. It is a body of water located in Western Asia, between Iran and the Arabian Peninsula.
Virginia is a state located in the continent of North America.