A WordPress "Theme" is a pre-designed "skin" that you apply to your WordPress blog to change its appearance without changing the content. You can be Blue Meanie one day and Cutline the next day.
You can also further customize any theme by making your own edits to the theme files. You may want the blog's columns to be a little wider to accommodate larger photos. You may want the font for post title headings to be a different color, or a different size.
Here's a little background on understanding how themes work, so you can begin customizing:
As you browse through blogs, take a few moments to notice the basic uniform elements all blog share:
Header. The header can be text only, an image only, or text and image together
Main content column
One (OR MORE) sidebar columns
Footer.


Now, go to your WordPress Dashboard, and click the Design, then Theme Editor tabs (In WordPress versions below 2.5, it is Presentation, then Theme Editor)

Take a look of the list of Theme Files. Each of the various components has its own file. The Main Index Template includes the PHP code that pulls all the various components together. Plus there are style sheets that specify design elements such as colors, and font styles across the board. Column widths can also be changed via the style sheets.

I'll look at making edits to the Style Sheet next.
I'll be using Cutline 1.3 2-Column (original version) for anyone who'd like to follow along.
The blog illustrated is Bloodhound Blog, a national real estate industry marketing and technology weblog written by, for and about real estate professionals. The authors are sometimes controversial, but always committed to excellence and independence.
I speak for the masses when I say "Huh?"