Hboot is partition layout (to get most space for apps), and S-OFF is basically turning off the security which allows you for some advanced stuff like changing hboot for example. (you need to S-OFF just once, and then it's easy as going to recovery and flashing ROM's)
You can also flash ROM's without S-OFF or changing hboot but you will have less internal space, it's also easier to recover phone with S-OFF if something goes wrong.