Put simply, a domain is what you would usually refer to as your website's URL.
An example of a domain: wphosting.com.au (or http://wphosting.com.au)
- Notice the domain name and .com.au extension?
An example of a sub-domain: hello.wphosting.com.au (or http://hello.wphosting.com.au)
Note: The email account that you create does not need to receive mail and there is no requirement for mail to be serviced by cPanel either. The account is only used for authentication - adjust your 'From Email' to something that you can receive.
WordPress by default will use PHPMail to send email...