Both words mean she, but what's the difference, how should I use them?
あれ does not technically mean she.
There is a very peculiar way of informal communication that allows あれ to stand in for basically anything. If you can't recall the right word, or you don't feel like saying it explicitly, or you are pretty sure the other person will understand in context, you can fall back to ridiculous sentences like:
I'll just go [verb] the [noun].
That's a [negative adjective] way of putting it.
Did you do [task]?
It is only in this roundabout way that some men sometimes refer to their significant others as あれ. Often it seems to be that they are not comfortable saying the word 彼女/妻/嫁 etc. out loud, especially in front of their buddies.
I can't join you for drinks because my [wife/girlfriend] is nagging.
We've been together for ten years now.
So to answer your question “How should I use them?”, I suggest that you not refer to fellow humans as あれ.
No, あれ means basically "That".