In SharePoint you have the following types of objects:
Web application
(1) A container in a configuration database that stores administrative settings and entry-point URLs for site collections. (2) A software application that uses HTTP as its core communication protocol and delivers information to the user by using Web-based languages such as HTML and XML.
Site collection
A set of Web sites that are in the same content database, have the same owner, and share administration settings. A site collection can be identified by a GUID or the URL of the top-level site for the site collection. Each site collection contains a top-level site, can contain one or more subsites, and can have a shared navigation structure.
Subsite
A complete Web site that is stored in a named subdirectory of another Web site. The parent Web site can be the top-level site of a site collection or another subsite. Also referred to as subweb.
When would you create another web application over provisioning more site collections? Would it be when you wanted a new base URL and/or want to use a different server.
A site collection should really be used for each department in a company. Then each department should be able to create there own sites.
Am I correct when you create a site collection it makes a default "root" site.