http://www.learnenglish.de/grammar/reportedspeech.htm

DIRECT AND INDIRECT SPEECH

Direct Speech / Quoted Speech

Saying exactly what someone has said is called direct speech (sometimes called quoted speech)

Here what a person says appears within quotation marks (“…”) and should be word for word.

For example:

She said, “Today’s lesson is on presentations.”

or

“Today’s lesson is on presentations,” she said.

Indirect Speech / Reported Speech

Indirect speech (sometimes called reported speech), doesn’t use quotation marks to enclose what the person said and it doesn’t have to be word for word.

When reporting speech the tense usually changes. This is because when we use reported speech, we are usually talking about a time in the past (because obviously the person who spoke originally spoke in the past). The verbs therefore usually have to be in the past too.

For example:

Direct speech Indirect speech
“I’m going to the cinema”, he said. He said he was going to the cinema.