I am confused about the major difference between a policy-based VPN and routed-based site-site Vpn
The difference between Route based VPN and Policy based VPN is how you indicate what type of traffic should be encrypted and sent through the VPN tunnel.
In a Route based VPN, you establish IP addresses which are the tunnel end points -- for Cisco, it would be the
interface tunnel0 IP address. Then any networks you route to that packet will be encrypted and sent through the tunnel.
In a Policy based VPN, you establish the tunnel, then specifically identify the IP networks who's communication should go through the tunnel. Typically this is done with an Access List identifying which IP address(es) are speaking through the tunnel.
Generally, the functional difference with these two is the Route based VPN creates one set of IPsec tunnels which all tunneled traffic flows between. And the Policy Based VPN creates one set of IPsec tunnels for each combination of IP networks you specify.