Addon Domains are domains that are pointed to subdomains. This means that you can host multiple domains, with different content, in a single web hosting account (that is if your current package supports it).
Your main domain is domain.com
Your additional domain names: me.com and you.com
me.com will be pointed to me.domain.com (however me.com will remain in your web browser's address bar)
you.com will be pointed to you.domain.com (however you.com will remain in your web browser's address bar)