The discussion add-on creates two new page types: discussion and discussion post. The discussion page type is for creating and organizing discussion areas. The discussion post page type is used when a new post is made and is where your conversations actually take place. Essentially, both page types are places for a special block to sit. Both of these page types can be edited from Pages and Themes to fit with your site. Both inherit from your theme's view.php. The look of an actual discussion is built out from "elements" in the package and theming a single discussion thread is more of an advanced task suitable for a designer familiar with concrete5.
The primary new block included in the discussion add-on is the Discussion Categories block. It works like a page list block in the sense that it can be used to show discussions occuring beneath the current page or at on a specific page. In addition to the default table-based look, the block includes a div-based template for easier theming.
The edit dialog for a Discussion Categories block lets you pick which discussions to show and how to sort them.
Discussion Topics is like Discussion Categories except that it is used for tracking a specific conversation instead of summarizing a group of discussions.
Here is a Discussion Topics block above a Discussion Categories block. The "New Topic" post is shown as the most recent post in both blocks. As users contribute to the discussion, only the most recent post will be shown in the Categories block but as people create more more posts in the "General Chat" discussion, those posts will show up iunder "Topics". Clicking on a discussion will open up the page for the thread.
Editing a discussion topics block brings up different, more specific options for sorting and organizing conversations.
The Discussion Post List does just what it sounds like - it lists an assortment of posts. It is fairly agnostic as far as the category or topic of discussion, but it does offer options to refine what is displayed.
This is a discussion post list, it is listing all three discussion posts on a site. The block will show a list of whole posts. The block is more useful when you use its edit mode options to refine what is displayed. Aside from choosing which page it pulls discussions from, it can also use the discussion tags system in order to try and find posts related to eachother but may not be from the same page, or to avoid posts on the same discussion area but that are not related to eachother.
As an example, if you had a cooking website with a page about pizza, and you also had a discussions forum called "Recipes" you could include all of your discussions related to "pizza" on the "pizza page" using this block.