A factory reset is just as you stated, "a reset to factory settings", this would revert the firmware (updates, if you have any) back to what the tablet came pre-installed with.
As 5[Strogino] states you will want to charge up the tablet before doing the update, and leave it plugged in during the update process (which can take approx 10mins or more). I would go ahead and get familiar with the tablet and its menus, functions, etc. before running the update, just so you know what you're dealing with.
As 5[Strogino] states, once you run the update the tablet should do the rest (unpacking the zip file, etc).
Regarding the Google Market, this is one of the main features of the Android OS, which allows you to download and install applications from various vendors, many are free and some are for a small cost (usually $1-$3). Almost all tablets currently for sale do not have the Android/Google market pre-installed as Google has set very strict requirements for allowing this application to be pre-installed (mostly cell phones have this). Fortunately, many in the development community (such as Dexter and his Mod) have created update files that provide this application and all its glory to these tablets.
As far as using the tablet without the market, yes you absolutely can. The internet browser is 100% functional and HAS full adobe flash pre-installed, which many other tablets do not have. So, yes you can check email, watch videos, etc with no additional modifications. I will say that many popular websites and email providers have "Apps" available on the Android/Google Market that make checking email faster and easier (such as not having to use the browser to access email, and allowing for login/credential saving). So in my opinion, it is worth the extra effort to install the DexterMod which will provide these goodies. Installing the DexterMod is just as easy as installing an update. Hope this helps!