My first order of business is to explain that....TEMPLATES ARE NOT WEBSITES.  That's probably the most common misconception that I run into.  Templates are the lipstick & rouge of a site.  That said...let's carry on!

Many people are confused about websites, definitions, the process...all of it!  My simple slideshow above demonstrates that in very basic terms.  If you need further detail...

Step 1: Domain Name

Your domain is your address - your "dot com".  Just like "123 Elm Street" is an address. It isn't a house, it isn't a piece of land. It's basically just some letters stuck together that you purchase the right to use on a yearly basis.

Where can you purchase a domain name?  Several places!  I use ENOM, they have superior DNS handling, which means there is very little chance that your site will get that "cannot be found" error.

Just like an address is worthless without real estate, a domain is worthless without hosting.

Step 2: Hosting

Hosting is your "space" on the internet.  The public cannot access files on your personal computer (for good reason!), so for your website to function, you must store your files, text and graphics in public domain. 

Great places to host...

The Design Shoppe
Most big-name hosts don't own their servers (the actual machines that hold your data).  They rent space on servers off-site.  The Design Shoppe owns their own servers. Their machines are at arm's length, giving them full control over the operation and service they can provide.  Mom-owned and operated, they have superior service and I highly recommend them.

Require Wind-Powered Hosting?
If you run a site that sells organic and earth-friendly products, then you may want to choose wind-powered hosting.  Many hosts claim to be wind-powered, but there is no way to prove whether they are or aren't.  Hostgator provides wind-powered hosting at affordable rates.

Step 3: Structure

The platform (structure) in which you build your site is paramount.  It all comes down to what you plan to accomplish with your site. Some popular website structures are:

Shopping Carts
My website is build on ASD Cart, an extremely easy to use program allowing full control over your online shop.  Ther are other popular carts out there, including Zen Cart, OSCommerce, Agora Cart, CubeCart...the list goes on.  I have tried every one of them, and I am satisfied with the cart that I work with.  (I don't design for other carts, just this one!)

Blog
If you're looking for a simple site to use for family updates, online journaling, or just to have your own little spot on the net, then a blog is a great solution.  Two popular blogging platforms are Blogger and Wordpress.  Both offer free services and both are compatible with hosting that you purchase.  From personal experience -- if you want a freebie, go with Blogger.  If you want to host the blog on your own space, go with Wordpress.

Content Management Systems
Also called "CMS", these systems offer nearly every feature you'd ever need.  Overkill for most people, but perfect for those who wish to create an online community.  These systems include forums, databases, lists, any add-on you can think of.  Some popular CMS programs are Joomla, Drupal, Mambo, Xoops, DotNetNuke, SoopPortal...I can go on & on.  (I design for Joomla, Drupal and DotNetNuke)

Built from Scratch
Some websites are so simple that you just don't need any of the above. Also called "Business Card" websites, these are generally 1-3 pages of static (always stays the same) content.  Most designers can build you a static site with any template.

Step 4: The Templates

As the slideshow demonstrates, the template makes your site "pretty".  Your site will function without it, but if you're going to make your site work, you want it to be eye-catching and unique.

Templates can be switched out at your leisure, giving you the option to constantly update your look.