Reseller accounts let you make hosting accounts, of the space which is given you. Hence, your reselling the space given to you. You get special features to do this with the Accounts.
You should do what you want to do, make your hosting company, or just use it to host your friends or whatever.
You dont have to have a domain, yet it would seem more professional.
It is not always cheaper, in fact, they're usually more expensive. It depends on the features. For example:
A Reseller account with:
1gig space.
10gig b/w.
Will be cheaper than a Shared Hosting with:
20gig space
250gig space
And Vice Versa if the specs are swapped around.
This is just a rough guide, hope this clears it up!