Summary
Here is a brief explanation of the difference between a parked domain and an add-on domain

Addon Domains
An Addon Domain is a domain name which points to its own folder within public_html and appears as a separate website from your primary domain.

• This allows you to have two separate Web sites on your account. You can have a cars.com and then a candy.com as an add-on domain. The candy.com would be a completely separate Web site and visitors would not know that it is part of your cars.com account.

Parked Domains
A Parked Domain is a domain name that points to your main Web site on your account

• For example, if cars.com is your main Web site, you can purchase the cars.net and assign it as a parked domain so that if a visitor were to type cars.net they would see the same Web site as if they had typed cars.com.