The chapter book, or middle grade novel, did not appear until the 20th Century. According to Marsha Skrypuch, early chapter books, geared to ages seven to ten, are anywhere from 500 to 3000 words. Unlike picture books, chapter books include a story told mainly through prose, although they can include illustrations. They are divided into short chapters to give the young reader, often with a shorter attention span than an adult, a chance to pause. The vocabulary is controlled. Flat Stanley (1964) and Busybody Nora (1976) are two examples of early chapter books.
The middle grade chapter book, geared to ages ten to twelve, is 10,000 to 50,000 words in length. It serves as a good transition between readers and novels. Sold at book clubs and fairs, it is the easiest to sell of the chapter books. The children select them and their parents pay for them. The middle grade protagonist is a child, the topics are still child-related, and the vocabulary is rich. Stolen Child and One Step at a Time, both by Marsha Skrypuch, are examples of middle grade chapter books.
Finally, the young adult chapter book (Y/A novel) is 40,000 to 60,000 words in length and is geared to teens. The protagonist is a teen. The subjects are gritty, but they are "handled with kid gloves", according to Marsha Skrypuch. The covers are usually "edgy and sophisticated". Judy Blume, author of Are You There God? It's Me Margaret, was the "Queen of the Y/A novels" in the 1970's and 1980's.
For more information, read http://www.calla2.com/wordpress/tips/types-of-kids-books/.