Confused:-)
Domain name - e.g. with reputable Domain Registrar like Moniker - change DNS (Domain Name Server) in admin of Domain Registrar to point to host (host will give you the appropriate DNS details)
Host - hosts have servers (computers) and one tiny bit of one hard disc on one computer will have your site on it.
Host's control panel. With luck, this will have Fantastico, allowing one-click instal of Wordpress. During the installation process Fantastico will give you login address to go to and password and user name to log in.
FTP - this connects to your host. Your host will have given you a user name and password so that you can upload files and stuff.
Wordpress - has a folder called wp-content which contains another folder called themes. Create a subfolder called your new theme's name. Upload contents of new theme into this folder. Will usually be index.php, page.php, category.php, style.css etc.
Upgrade WordPress. Can click on link at top of your WordPress site's Admin page. Might not work for latest upgrade to 2.8.2 (doesn't on two of mine) Theoretically click on link and automatically upgrades