Sure, in a nutshell, again, it's kinda like a house. Picture a house as your hard drive. Partitioning is just as it sounds, say, partitioning into bedrooms and living room and kitchen. There are your partitions. Formating is just like preparing them for use. Paint and carpet, etc...
So if your drive already had a partition of 2gb and all you do is format, you are simply RE-preparing that "room" for use. But the room doesn't grow any larger, if you follow.
FDisk can erase all the "rooms" to make one large space again, letting you partition however you like. Once you create a partition, it HAS to be formatted before using. And you can't format until you have a partition first. And don't forget that you can partition and format some space, but not ALL of it. So any leftover space on the drive that is not partitioned will just be lost and unusable until partitioned and formatted. You can't see this empty space with Windows 98 (unless you open Fdisk), but XP you can see it in Disk Management.
As for benefits of partitioning, they are few in my eyes. Some people like to partition one area for just Windows, and another for programs, and another for data. Or just one for Windows and programs, another for data.
The benefit there is if Windows is corrupted and you HAVE to format and start over, your data partition is safe.
The downside is, if your hard drive just dies, partitions won't save you anyway, so it's not really for data recovery, just convenience for reinstalling Windows.
In any case, I just use one partition on any system I build, it's easiest that way. Less problems in recovery dealing with partition tables and junk. And if you partition one for windows and one for data, you're just guessing how big those would be. Cause maybe later windows will need more space? And you can't change that later on unless you use a program like Partition Magic. If you don't have that kind of program, you can't change your partition size without deleting everything.
Hope that helps any. Good luck.