Your phone has VZ 3G internet for data.
Tethering, is to allow another device to access that internet connecton thru the phone.
This can be:
1. Physical, thru the use of USB, hence USB Tethering, or;
2. Wi Fi Tethering, whereas described above.
The advantages of wi fi are obvious, as one is limited to one device at a time thru a physical connection.
Froyo comes with both, the build we have has USB only, however you can add wi fi to it. Hopefully, but not exected, that the final release of froyo will have wi fi.