Always-On Configuration Clarifications Do we have to Install stand-alone instances of SQL Server 2012 or Failover-Cluster SQL Server Instances while configuring Always-On?

I am asking this question because I saw few configurations using stand alone instead of Clustered SQL Server Instances.

And when we say:


  Always-On will support up to two secondary replicas synchronously replicated per availability group with Automatic Failover.


Does it mean: 


  A Database configured for Always-On HA/DR can be in synchronous mode and can be failed over to Two replicas(Two other SQL Server Instances)


Maybe I am getting confused but can you please explain about Always-On supporting two secondary replicas synchronously with Automatic Failover?
Be careful with the term Always ON, This refers to Always On Failover Cluster Instances and Availability Groups (Also database mirroring but this is deprecated). FCIs and AGs are very different technologies. 

To answer your question AGs can be installed on stand alone and clustered instances. It all depends on your HA/DR requirements.

2nd question: 
Yes AGs can automatically failover their databases to other SQL instances (refered to as nodes). The servers running the SQL instances all need to be in the same windows failover cluster.

This white paper from Microsoft might be a good place for you to start reading on AGs.