Manual about modules confusing me
I have the book, but page 404 does not include the quote in mine (the beginning paragraph is "The switch statement does...", so I cannot interpret the exact context of the quote.  In general, every page is assigned a path and drupal determines the display from its 'menu' of path options.  Think of the displayed menus as a subset of the available options in drupal's list. 

Drupal stores information about each site in the database and callback functions are associated with the each master menu option.  When  a URL is requested, it queries the database, finds the associated function and executes it.

I found parts of 'The Definitive Guide...' confusing to begin with too, but it is actually pretty good overview and quite useful.  The problem is that Drupal is very large and a complex system to get your head around at first. The learning curve seems enormous at first (I know), but soon parts begin to fall into place and you begin to "GET IT".

This site is a great place to expand your understanding and begin to put it together.  Your question was well written (clear) and there are plenty of people here to answer (although traffic is slow this week with the holidays).