Website hosting questions

So I've been trying to look for a good webhost for a few good days now, and I've chosen 1and1 webhosting, reccomended in one of my threads. I chose the home package since I wont be needing to much space or ftp accounts. But I don't understand some of the specs. Like when it says subdomains. Is that like this,"http://putnamehere.mywebsitename.com". So could I give people like free hosting? Also, what is an external domain? Also, again :) Do I have to pay to register a .com or .org extension? Here is the package I am thinking about:HERE

yes

2 free domains for you too.