What is the difference between the words "over" and "above" as far as its usage in prepositions is concerned? I have heard that it is used to differentiate between the things which are static and which are moving. I sincerely do not know whether it is correct or not.
It will depend on context and situation and local culture.
For example, consider above/over in the context of organization rank. One may mean "in the position just superior" and the other "in a position anywhere superior." But context and local culture may switch them. "I am above you" may mean "right above" or "very far above." And "over" may also be subject to the same ambiguity, determined by local culture and usage.
Consider altitude, as for an aircraft. "Above the mountains" may mean you are high enough not to need to worry about hitting them, even if you are not near them. "Over the mountains" may mean you are at an altitude higher than the mountains, and also nearby to them.