Domain name - Web Hosting Relationship

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So, what has the domain name to do with hosting a website? Well, there is a close relationship between your domain name and your web host (the computer where you'll host the website).

Domain name and IP relationship
The domain name is in fact a label that will redirect the visitors to the IP address of the computer where the site is hosted, so these two work in pairs.
We use this system because it's easier to remember a name rather than an IP address, which is a group of four numbers, each number between 0 and 255 (e.g. 67.72.123.201).
The domain name - IP address pair is then recorded by a DNS (Domain Name Server).
But although they are related, the website/domain name and the hosting server are two different things, so one should not confuse the domain name of a website with the hosting for that website.

 An analogy
Let's say you want to call your friends, the Smiths, to invite them over for dinner. You ask your wife to do it, as you are a little busy at the moment. She doesn't know the number by heart, so she searches for the number in the phone book and calls them.

This example almost replicates the way domain names and hosting work. The Smiths' name is the equivalent of the domain name. You didn't ask your wife to call a number; you just said to call the Smiths. Of course, the Smiths have a telephone number associated with their name; that's how you can actually reach them by phone. The telephone number is the equivalent of the IP address of the computer where the site is hosted.

The role of the phone book is also an important one. It helps you find the match: name - phone number. The phone book role is played by the DNS servers. They are a network of "phone books" that know every domain name - IP address association, so when you type a website address in your browser, you get the content of the site that is associated to that name and not the content of another site (or empty content).
To change hosting, you simply redirect the domain name to another IP and modify the DNS servers of your domain name. Of course you also need to actually move the files to the new hosting server . It's like the Smiths getting a new phone number. The name stays the same, but they can be reached by calling a different number.

Summary
When you're buying a domain name, you're buying in fact the right to redirect that URL to a web server of your choice, where your website is hosted.