I was very confused but the following thread cleared my doubts:
Multiprocessing, Multithreading,HyperThreading, Multi-core
But it addresses the queries from
I think answers so far are pretty much to the point and give you a good basic context. In essence, say you have quad core processor, but each core is capable of executing 2 simultaneous threads.
Note, that there is only slight (or no) increase of speed if you are running 2 simultaneous threads on 1 core versus you run 1st thread and then 2nd thread vertically. However, each physical core adds speed to your general workflow.
Now, say you have a process running on your OS that has multiple threads (i.e. needs to run multiple things in "parallel") and has some kind of stack of tasks in a queue (or some other system with priority rules). Then software sends tasks to a queue and your processor attempts to execute them as fast as it can. Now you have 2 cases:
I suggest reading Wikipedia page on thread. Very first picture there already gives you a nice insight. :)