* Graduation refers to the *act* of completing a course of study and fulfilling all requirements for a degree or diploma. It's the successful completion itself.
* Commencement refers to the *ceremony* that celebrates the graduation of a group of students. It's the formal event marking the end of their studies.
So, you *graduate* from school, and you *participate in* or *attend* a commencement ceremony. You can graduate without attending a commencement, but a commencement wouldn't exist without graduates.