What is a credit note and Gift Card?
Discount/credit note, will allow the customer to get a discount (valid for a particular item usually) whereas in Gift card they can allow the exchange for items up to the stated value.
Is it possible to create a Credit note and Gift Card?
By default , Sorted returns app will create a credit note and not a gift card. However, you can change the settings of the credit note through the discount section of the Shopify app.