We have a very detailed article explaining cell balancing, passive vs active balancing, and much more here: https://currentconnected.com/batteries/bat-basics/cell-balance
Passive Cell Balancing
BMS designs will vary between manufacturers, but most will utilize a resistor bank that can dissipate a few ma of current from cells that have higher voltage. Passive balancing usually occurs during charging, when a cell has reached 3.5v in order to bring cells to an equal top-balance. It is common to see passive balancers because they are compact, cheap, and can easily be scaled to large number of series connected battery banks.
Passive balancing is not good for second-hand or heavily aged cells because the differences between cells may require a much higher balance current than brand-new well-matched cells. Another pitfall to passive balancing is that it only works when cells are almost completely full and can only maintain a top-balance. Passive balancers are also wasteful because power is turned into heat instead of diverted into cells that could benefit from additional power.
Active Cell Balancing
The most common Active Cell Balancer is the QNBBM-A module listed here. These modules are much more capable than passive balancers because they can easily move 3 amps of current from a cell with a higher voltage into cell(s) with lower voltages. 97% of the power being moved is retained instead of 100% dissipated as heat.
Active Balancers go great with second-hand or aged cells because they can give the weaker cells in a pack a “crutch” curtesy of the stronger cells in the battery pack, leading to better overall system performance. They are also great in brand new systems because they eliminate the need to manually top balance cells, which can require expensive equipment.
Is Active Balancing Better Than Passive?
In some applications, such as with brand new matched cells, the cost of active cell balancing equipment is not worth the expense. The small amount of balancing needed with brand new cells means that most of the time an active cell balancer wouldn’t be doing much. In this case, you would not be better off with active balancing.
If however, you are using used, or slightly mismatched cells, or simply want to skip the step of manually balancing, utilizing an active balancer will allow energy from healthier cells (higher voltage) to be moved into weaker cells (lower voltage), therefore extending the runtime of the system. In this case a significant increase in usable capacity and remaining lifespan is possible.