I was wondering whether anyone might be able to tell me in layman's terms how to extract or differentiate between ridges and hilltops from 10m elevation data using ArcGIS 10.1?
Creating watersheds should help you locate both ridges and hill top. Then, I would define a hill top as a local maximum, while a point on a ridge is not the maximum (there is one other point higher or equal to this point). You can identify local maxima using the focal statistic tool.
another way to look at the problem is to analyse at the opposite of your DEM (zero minus DEM). You compute the flow accumulation that you convert into streams. One of the ends of the streams will be a top, and the stream will be the ridge.
Note that 10 m DEM is quite precise, so for this type of analysis it is probably better to smooth your layer first in order to avoid local maxima.
Defining ridges vs hill/mountain tops is pretty scale-dependent. Jeff Jenness covers conceptually how to model topographic landforms in his article Some Thoughts on Analyzing Topographic Habitat Characteristics. If you poke around on his website, you can find his poster on this as well, under ArcGIS tools > Land Facet Corridor Designer. (Link is here)
Jeff has a tool to model topographic position in his land facet tools extension for ArcMap, and I rewrote a simple 4 class (ridges, canyons, flat slopes, steep slopes) version of his tool as part of a Python toolbox (download the CorridorDesigner general use toolbox).
If you're doing this from scratch, you can: