A "domain" is a separate domain name, usually a separate website. Such as tibetangeeks.com or yapodu.net.
With "shared hosting" or "reseller hosting", many different domains can live under one account.
Rule of thumb: If you need hosting for your website alone, you don't need multiple domains; you should just get a simple one-domain hosting account. If you think you might want to provide hosting for friends or other related organisations, consider "shared hosting" or "reseller hosting",
Note: "Unlimited" just means, no limit unless you get so big that your site is putting stress on the server! If that happens, you will be encouraged to upgrade. (And if that happens, your site has become really big and popular ... so it's a good thing, not a problem!)
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