A domain is used in organisations with active directory structures for user accounts and machines, it allows organisations to set group policy and manage objects from within active directory, as well as tieing in user accounts to local servers/services such as Exchange and SharePoint.
If you wil only use the machine at home then home premium should cover you as it comes with Media Centre, Aero etc. SOHO (Small Office Home Office) networks tend to use Workgroups instead of domains
Sounds like you should go for Home Premium to be honest. I have Home Premium and Ultimate and besides the domain stuff there is very little difference. Any other features like Bitlocker and Remote desktop can be substituted easily with third party software.
Windows 7 can't come quick enough in this respect - I'll just be able to recommend Home or Pro.
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