Getting Started

The acronym Moodle means: Modular Object Oriented Learning Environment. But the key aspect here is about the letter M(Modular). Everything in Moodle is a module, a plugin, and each plugin is designed to do something specific.

We have activity plugins (forum, assignment, quiz), blocks (ranking, levelup, calendar) and a big variation of others type for different purposes, you can see the list in the official Moodle plugins site: https://moodle.org/plugins

Backing to the main question. What is a theme and what it does for you?

The theme only changes the Moodle appearance, its colors, blocks position, alignment. The theme has the power to change any visual aspect of the Moodle interface.

What the theme does not do?

The theme doesn't change the Moodle behavior, its plugins or the third party plugins. The theme can add some new features, but it is very limited about it, generally it is something related to appearance.