It's not confusing, it's quite logical. You either use the OSS software on your own server and can do with it whatever you want. Of course you will have to pay

It's not confusing, it's quite logical. You either use the OSS software on your own server and can do with it whatever you want. Of course you will have to pay for the server. Or you get to run an instance of the software running on the server or WP.com and thus get the software AND the hosting for free. However, the free part is limited, if you want more you'll have to pay - again for the hosting.