What is the difference between steep and seep?

In terms of something like tea or coffee, steep means to soak something in liquid in order to extract flavor.

("Percolate" is the similar Word usually used with coffee, and it means to filter something through, in this case also to extract flavor, but it might have a more "forced" feeling than steeping... actively forcing water through, rather than just soaking it.)

As far as "seep" goes, that just means that something is leaking out, with the action on whatever is leaking rather than on someone actually purposely doing it. So, liquid might seep out of the bottom of a defective cup, but you can't "seep" something as an action to make a beverage.

Other differences are the obvious spelling difference, and steep can also mean a heavily graduated hill or slope, and seep can be a slow leak like out of a fuel tank seam. Seep can also be seen as a small spring emerging from a hill.