HI Sankara,
For understanding components I would recommend reading the following documentation :
https://help.sap.com/saphelp_nw74/helpdata/en/95/8ead51e2e94ab8bcdc90fb7e9d53d0/content.htm
And then think of it in terms of Fiori Applications. The basic concept is of reusablilty . Once you develop using the Component approach , then the application can also exist in a broader scope also .
In case of Firoi apps, this broader scope would be a launchpad which provides access to different applications like Timesheet , Purchase Order, Travel Request etc.(These applications are basically different Components).
I hope this is helpful.
Regards
Mayank Jain