When I first investigated WordPress, I was confused by the differences and similarities between WordPress.com and WordPress.org. If you’re in the same boat, Sanj Sahayam’s article, 4 Reasons You Should Never Use WordPress.com (And 4 Reasons You Should) clearly explains the tradeoffs between the two platforms.
By the way, this blog is currently hosted by WordPress.com. I also host some clients’ websites using WordPress on Linux servers. WordPress is remarkably versatile.