The important thing to note in this case is that we make a comparison here as to which option we like better.  Here the extent of application is restricted to the particular context/situation rather than a general preference. That is to say , simply ‘Prefer’ applies to a general preference whereas ‘ Would prefer’ to a specific/particular preference or situation.

EXAMPLES

• A:  Which would you prefer, tea or coffee?
• B: I would prefer coffee, please.(  Sometimes one would prefer tea generally, but for this particular occasion his/her preference is coffee.)
• Note : We say ‘Would prefer to do’ ( but NOT ‘doing’).
• A:  How will you go home?
• B: I would prefer to go by car.
• I would prefer to stay at home tonight rather than go to the cinema.
• They would prefer to come with us rather than watch the movie.
• A: There are books and albums for sale.  What would you prefer to buy?
• B: I would prefer to buy an album.