An addin is a workbook with custom commands and functions that can be used with Excel. Addin's are used to distribute macros, userdefined functions or custom solutions to other users. If the addin contains VBA code that refers to the workbook running the code you have to use the object ThisWorkbook instead of ActiveWorkbook. An addin will never be the active workbook.

When you save a workbook as an addin, the content is "compiled" and protected so that the source code is (usually) not visible and editable by other people. You can find tools on the Internet that can "crack" this protection from addin's made for Excel 5/95 and Excel97, but ordinary users will usually not be able to see or edit the contents of an addin.

When you create an addin in Excel5/95 you have to save your original workbook if you want to be able to edit the contents of your addin. Excel5/95 can not open and edit the addin, you will have to edit the original workbook and create a new addin every time you need to make a change to the addin. Excel97 can open and edit addins, so it's not necessary to keep a copy of the original workbook you created the addin from. It's also possible to password protect the contents of the VBA project in the workbook so that the source code is (usually) not visible and editable by other people.

Addin's can be installed by opening the file as you open an ordinary workbook. You can also install the addin by saving it to the Library folder and installing it from the Addin Manager with the menuchoice Tools, Addins.... When you install an addin the custom functions are available to the user, and any userdefined menus in the addin will also be added to the existing menus in Excel. 

Addin's installed by the Addin Manager can be uninstalled by removing the checkmark in the list of installed addin's in the Addin Manager.

Addin's can also be installed and uninstalled by using VBA-code.