What is the difference between the sentences?

They are functionally the same.

There could be situations where the context makes one preferable over the other. For instance, maybe someone tells you that they've found a new way to use their bicycle for exercise – by lifting it! So you might answer with,"I only use my bicycle for exercise by riding on it."

You could eliminate the phrase, "by riding on it."

It is understood that you would be riding on it.

I would phrase it:

"I exercise by riding my bike."

or

"I ride my bike for exercise."

Ditto.

There is no difference. the prepositional phrase starting with "by" is unnecessary and so both are equal.

Nonsense, by is needed.

I think the OP is asking what the difference between the two sentences is, not seeking an alternative way of expressing the thought.

Look at the permutations of wording in this excerpt from "Elegy Written in a Country Churchyard", by Thomas Gray, and how the meaning is unaffected:


The weary ploughman plods his homeward way, And leaves the world to darkness and to me.

The ploughman, weary, plods his homeward way,
His homeward way the weary ploughman plods,
His homeward way the ploughman weary plods,
The weary ploughman homeward plods his way,
The ploughman, weary, homeward plods his way,
His way, the weary ploughman homeward plods,
His way, the ploughman, weary, homeward plods,
The ploughman, homeward, plods his weary way,
His way the ploughman, homeward, weary plods,
His homeward weary way the ploughman plods,
Weary, the ploughman homeward plods his way,
Weary, the ploughman plods his homeward way,
Homeward, his way the weary ploughman, plods,
Homeward, his way the ploughman, weary plods,
Homeward, his weary way, the ploughman plods,
The ploughman, homeward, weary plods his way,
The ploughman, weary, homeward plods his way,
His weary way, the ploughman homeward plods,
His weary way, the homeward ploughman plods,
Homeward the ploughman plods his weary way,
Homeward the weary ploughman plods his way,
The weary ploughman, his way, homeward plods,
The ploughman, weary, his way homeward plods,
The ploughman plods his homeward weary way,
The ploughman plods his weary, homeward way,
Weary, the ploughman, his way homeward plods,
Weary, his homeward way the ploughman plods.

prepositional phrases are additive, not entirely necessary. They add clarity, but the basics of the sentence are often retained without the prepositional phrase. It adds context often, but not always meaning. jmo

Not capable of admitting your error, not worthy of debate.

the second sentence just sounds better.