What is Steam?
what exactly is 'steam' is it online games, or downloaded software? I have never done 'online games' so unsure
Steam is a game platform used to deliver games to you digitally. It is not an "on-line" game per se. Meaning you don't have to be online to play games.
Anyway it's arguably the number one game delivery platform by game developers. Meaning most games sold today are delivered via Steam. This also means that these games can not be run without Steam installed unless hacked, thus pirated.
Examples of Steam based games (game that require Steam) include Bioshock Infinite, Skyrim, Metro 2033, Portal, just to name a few. Some will try and tell you these games can be run without Steam, but that isn't true as the manufacturer of the game intended it to be delivered via Steam, even if you buy a boxed copy of the game. This is also because Steam incorporates a sort of DRM scheme.
So how does it work....
Typically say you buy a hard copy (boxed) game and go to install it. Well, if you don't have Steam installed, the app will automatically be installed, you will be required to se up an account, and after that, the app... Steam, will download your game.
Say you already had Steam installed, when you go to load the game, Steam will download it to your Steam folder, and the game will be available to play once download is complete.
The good thing about Steam based games is that they are always updated and kept updated without you needing to do anything. This also means that when you download a game, it's already patched to the latest version. Therefore there's no need to look for patches.
On the other hand, if a company delivers a bad patch, that's what will be downloaded as Steam is just the messenger here. Think of them as a mail courier, they just deliver.... good or bad.
This brings me to anther point.... Steam is just the messenger, so if there are issues with a game, you'll have to deal with the developer... not Steam (Valve), Unless it's a Valve game - Half-Life series, Portal, Left For Dead.
Lastly.... the beauty of Steam is that you can just download the app to any PC and all your Steam based games will be there. Of course they'll have to download to that machine. But the point is, you can have your games available to you anywhere. And depending on the game (most games now), even your saves are stored in cloud, meaning you can pick up from where you left off at another machine.
Some links...
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Steam, The Ultimate Online Game Platform
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https://en.wikipedia.org/wiki/Steam_(software)
I know this post is a bit wordy, but hopefully this answers your questions.