It's not difficult to understand your confusion; "parked domain" is a horrible, horrible name for the thing that it is, but as with so much in life, we're kind of stuck with the terminology now that it's in use. (Many, many years ago, a "parked domain" was a domain that was purchased and reserved, but not yet in use. That, at least, made sense, unlike the current meaning.)
A "parked domain" is a domain or subdomain (a named web address, if you will) that points to the same place as your main domain (the subdomain that was provided with your hosting account). On the Free Hosting servers, your main domain always has to be a subdomain provided by x10Hosting (your-part.x10host.com, your-part.x10.bz, or what have you). They used to allow changing your main domain, but people would use fly-by-night domain registrars that would disappear, or registrars that required a certain minimum amount of traffic to maintain the domain, or some such, and would frequently find themselves with nothing pointing to their account at all. That would require a support admin to fix things for the user, and it happened often enough to make it much more expensive than Free Hosting can cover (without forcing ads on you). The problem is that "your-part.x10host.com" doesn't present a very professional (or easy-to-remember) face to the world.
You can obtain a domain from just about any domain registrar (say, "your-part.com") and add it to your account a a parked domain. That will let visitors access your site using a more appropriate URL than the subdomain that x10Hosting provides. (It will also allow you to move your site to another hosting provider without forcing your users to find out what your new URL is.)
An add-on domain is similar, but it usually points to a directory within your site rather than to the web root of the account. That may be something that seems to be a completely different web site with an unrelated name, or it can be a blog or forum attached to your main web site (blog.your-part.com, community.your-part.com, that sort of thing). Do note that any subdomains you create on your account "eat" an add-on domain, and vice-versa.