Add-on Domains permit you to host multiple websites from one account.
What happens is your web hosting account (ie: The Web Server) is intelligent enough to know which web site is being requested and serve content from different directories based on this knowledge. For example, let's say your primary account is SMB-IP-Phones.com but you also registered Technolog-Services.com and want to have a separate website for that domain. Your primary site is served from web hosting account's your public_html directory (sames as www directory), but your new site would live in public_html/Technology-Services.com. The web server selectively determines which site is being requested and delivers the site content from the relevant directory.
Add-on Domains are very similar to Sub-Domains (see FAQ for "What is a Sub-Domain?") in that the content they serve is that from a sub-directory of your account's public_html folder. It's still required you have the alternate domain name(s) registered and their DNS configured to point to the same Name Servers as your parent domain (primary account domain name).