(Disclaimer: I am a native croatian speaker.) There's a significant difference between croatian and serbian language: croatian language is composed of three dialects and a standard language which are not found in serbian. It was a political movement to merge one of those dialects (shtokavian) with serbian language. So, serbian is somewhat similar to shtokavian but not to other dialects that compose the rest of the croatian language.
I, as a native Serbian speaker, have a 100% understanding of what is being said on Croatian national TV, and 100% understanding when reading websites in Croatian.
While the difference exists, calling it significant is just... untrue. For non-speakers, it is barely noticeable.
I have probably the same understanding of serbian. I used to read a lot of science fiction literature translated into it. Not to mention that I learnt cyrillic script in elementary school in the 1980's when the language was still officially called "serbo-croatian".
But there are significant differences: for example serbian people don't understand kaykavian and refuse to. There are a lot of jokes on the theme in old yugoslavian tv shows. Kaykavian is part of croatian language.
I am not sure what you mean. I tried to explain the situation. "Serbo-croatian" as such doesn't exist (http://www.britannica.com/EBchecked/topic/535405/Serbo-Croat...). Yeah, you can mix both of them and speak serbo-croatian as a mixture of both, but people also mix english language with their mother tongues. How many kids today name their language as "croatian-english" or "german-bosnian" for example? And I heard both of these in real-life situations.
