Let's say your domain is mysite.com and you want to install a message board. Now, you can either put it in a directory called mysite.com/board or create a subdomain for it and access your message board either via mysite.com/board or board.mysite.com. This feature costs you nothing :)
Be sure to check this article on how to create a subdomain.
Say that you have two domains mysite.com and my-other-site.com. If you want them both to go to the same website, parking a domain allows you do just that! :) Afterwards, when someone types either www.mysite.com or www.my-other-site.com, both links redirect to the same page of your website. Just note that you need to purchase additional domains.
Check this article on how to park a domain.
Let's again say that you have two domains mysite.com and my-other-site.com, only this time you want the two domains to be totally independent websites managed via the same hosting account. That is where the Add Website feature comes in hand, just note that you also need to purchase additional add-on domains.
You can follow this article on how to create an add-on domain.