I think I'd cause less confusion if I renamed my car to pimp-mobile. But well, these renamings make sense. So here is some Sharepoint 2007 terminology, that you must get familiar with.
One or more web servers (webheads) and back-end servers. Each farm has a single configuration database.
Web Application -
A web application is what used to be called "Virtual Server". I am guessing the "Virtual Server" guys at MSFT and the Sharepoint guys at MSFT had a boxing match, and it made sense to stick with ASP.NET 2.0 like terms, such a "Web Application". Conceptually, this is an IIS website extended to work with WSS3. Unlike WSS2, you no longer need an ISAPI filter to make things work. Instead, that is done by ASp.NET 2.0 concepts such as HttpModules.
Site Collection -
This is the top level site, which may contain other sites under itself. Each of these use the same content database. This used to be called "Site" in WSS2.
There can be a number of sites under a site collection; each one of them sharing the same content database as the parent site. These are synonymous to "Web" in WSS2.
Also, I am going to take Bill Simser's suggestion, and add a kick-link on all my Sharepoint related posts.
Go kick -