Before understanding the scope of featuers let us go through the sharepoint hierarchy. Refer the image below to get a clear understanding of the sharepoint hierarchy.
Server Farm : Sharepoint server farm can be small, medium or large based on the various factors like organisations infrastructure, number of web applications, number of users accessing it, etc. The smallest server farm consists of database server running on Microsoft SQL Server, one or more servers running IIS and office sharepoint server. Learn more about web server and application server roles on the this link. As the size of server farm grows you can cluster the farm with 2 or more database servers, more web front end servers.
Web Application : Sharepoint web application is similar to that of the IIS web site. When a web application is created using the "Create or Extend Web Application" link in "Application Management" it creates content database for the site collection, creates an IIS website and the virtual directories like "control templates. _layouts, _vti_bin,etc" mapped to the 12 hive sharepoint structure. You can have multiple content database in a single web application.
Site Collection : A web application needs to have at least one site collection which will be the root site of the web application. Sharepoint collection as the name suggests is the collection of sharepoint sites. All the sites within a collection share common features of sharepoint collection like shared permissions, web parts, content types, etc. There will be common sharepoint collection administrator for all the sites within it.
Sites : Site is a collection of web pages which is used to store information in an organized way. Site stores list of documents, discussion, lists, events and other types of information. Site provides controlled access to share information i.e access to authorized users only. Sites inherits the permission for users from the Site collection or it can break the inheritance permission and have own permission on the site.