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Both is tethering. WiFi hotspot allows you to connect mutiable devices at once over wifi. Traditional tethering is using a USB cable to your computer to gain access. Both accomplish the same result
Search is your friend, but i will break it down for you anyways.
There are 3 types of tethering. Official tethering which sets up a hot spot allowing 5 computers to connect, costs $20/month for 2 gigs of data.
Nonroot tether: Allows you to tether using a USB cable or bluetooth. Usually have to pay for the app but it piggy backs on your existing data plan. No monthly fees.
Root tether: Sets up wifi hotspot, totally free, as many people that want can connect to your phone and get internet.
First 2 options are 100% possible. the 3rd option will depend on if we get root or not.
If all you do is check your e-mail and surf the web a little, you will find it acceptable. If you watch youtube, hulu, or other video sites you may find it acceptable but will be slow. If you play online computer games at all it will not be acceptable.