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Explain it like I'm 5 years old.  

I don't know much about WordPress except that it's popular.  Is it free hosting? Can I design using a WP theme and then migrate it to my host, or copy the html into a doc and upload to my FTP?  Can a particular theme be modified?  Are paid themes worth the money?  Are there sites that provide freeware themes?

Where does one start?  

What would be the best way to use WP for:

A) The absolute beginner wanting a basic site

B) Someone like me with an established site/host who wants a total new redesign

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OH Good one Ted

Cant wait to see some input on this one as I have the same questions.

Been kinda slow here on this topic I see. I addressed this very question under the discussion Your Website.
WordPress was designed as blogging software. It's unbelievably easy to add a post every day, or every few days, or whatever. It organizes them and lays them out pretty, and makes it easy to do formatting, add pictures, put in links, stuff like that.
In my opinion WordPress isn't a very good tool for making a non-blogging web site. It's awkward to make menus, just lots of stuff. That may all be my ignorance, but I've got a WordPress blog at http://streetharp.com and I'd hate to try to make it into a real web site.
I prefer a content management system. I use Joomla, also free as is WordPress. I have two Joomla sites, at http://kcsps.org and http://humanesocietyofraycounty.org. Forgive me for not making real links out of those; I'm doing this post after bedtime on my Android phone and the mobile editor on this site doesn't facilitate creating links.
The Joomla learning curve is a *lot* steeper than the WordPress learning curve, but it's powerful stuff. Among other things, there are thousands of extensions, many of them free, to let you develop the site you want, whether it be e-commerce with a shopping cart, or contain fora, calendars, sell tickets and reservations, directly do one-step marketing of downloadable products - my two sites are both for entities where my wife and I volunteer, and I haven't even scratched the surface of Joomla's abilities. And just like Cigar Box Guitars, there is an active and friendly online community which is your best resource for learning.
But I didn't answer your questions. WordPress isn't "Free hosting". Hosting is like lunch: there ain't no such thing as a free lunch. First you pay somebody.for hosting. I use HostMonster and am very happy with them. So you buy a hosting package from somebody, and you pay them or somebody else to register a domain name, which you can then renew annually forever. After all that WordPress is free. Free to install on your newly hosted account / site and fill with content.
Somebody else will have to advise you regarding free themes for WordPress, I haven't looked into that. There are free themes for Joomla; that's another place where I found somebody I'm really happy with, but I'd have to fire up the computer to find his name and I'm way too tired. Should be asleep already.
I don't know the answer to the rest of your questions. Maybe somebody who does will chime in here.

Thanks Jeff, that's very helpful.  I do my site design myself using a freeware app, and host it at Yahoo Small Business.  I don't use any themes, I started with a blank screen.  Right now I'm in the middle of a complete makeover, and sometimes hit a creative brick wall.  I'm also looking for a free way to put a store on my site, with a shopping cart.

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