1) It means that if you ever wanted to go with an 8-channel audio solution (7.1 Surround Sound), you would need to use the front HD Audio ports on your case.
1) This means the cable coming from your case for your front HD Audio would connect to this port on your motherboard.
2) See Answer 1
Stereo, 2.1 and 5.1 audio surround should work without a hitch. 7.1 audio may take some manipulation to get working.