Add-on manager
Add-ons are (usually third-party) extra value features and functions that are not included with XBMC by default which can be added by the end-user themselves if they like to add. Plugins, script, and skins are counted as such "Add-ons" as they 'add-on' new features and functions to XBMC.
Python plugin versus script confusion
Please do not confuse "Plugins" with "Scripts". Unlike the Scripts, Plugins are not meant to be directly invoked by the user. Instead, Plugins are automatically invoked when the user enters such a virtual folder. Do not try to run Plugins files from the scripts window as that will only give you some weird error message. Plugins, unlike Scripts, do not really provide new functionality to XBMC, instead what they do do is provide an easy way to present content listings in XBMC through the native GUI interface.
Plugins
Plugins. XBMC features a Python Engine and XBMC GUI interface have built-in 'Add-on' support for displaying content listings that present to that GUI interface. Plugins, unlike scripts, do not really provide new functionality to XBMC, instead what they do do is provide an easy way to present content listings in XBMC through the native GUI interface. Content is usually online sources like Internet audio and video streams, (like Internet TV-channels, and radio-station, or Podcasts), or pictures from websites which as Flickr and Picasa Web.
Scripts
Scripts. XBMC features a Python Scripts Engine and WindowXML application framework (a XML-based widget toolkit for creating GUI windows) in a similar fashion to Apple Mac OS X Dashboard Widgets and Microsoft Gadgets in Windows Sidebar. So normal users can add new functionality to XBMC themselves (using the easy to learn Python programming language) without an illegal copy of the XDK and without knowledge of the complex C/C++ programming language. Current python scripts for XBMC include functions like cinema guides, TV-guides (EPG), e-mail clients, instant messaging, train-timetables, scripts to front-end control PVR software and hardware (like: MediaPortal, MythTV, TiVo, ReplayTV, Dreambox/DBox2), Internet-radio-station browsers (example SHOUTcast, Xm radio, Sirius Satellite Radio), P2P file-sharing downloaders (BitTorrent), IRC instant messaging chat, also casual games (sometimes also referred to as mini-games or party-games) such as Tetris, Snake, Space Invaders, Sudoku, and much more.