Audio plugins are typically divided into two groups, effects and virtual instruments (aka synths). Effects often emulate real-world hardware like EQs, Compressors, Reverbs, etc. They can be use in the same way as their hardware counterparts and often offer even more flexibility due to the nature of software. Virtual instruments are software-based instruments that can be played right within your DAW (and often standalone). You can access realistic instrument sounds like drums, piano, electronic keyboards, basses, and more using virtual instruments. Virtual instruments give musicians access to instruments that they normally wouldn’t have access to due to budget or space constraints in their studio.
Yes, plugins can be used within a DAW and most plugins require a DAW to host them. DAWs that run on Windows PCs usually support VST or Direct X plugins. DAWs that run on Apple computers typically support Audio Units plugins.
Yes, this is often referred to as a soft synth or virtual instrument plugin. Effects typically process or effect the sound (thus the name).
Plugins come in many different formats such as VST, VST3, RTAS, DXI, AAX, AU. Every DAW is typically compatible with at least one of these formats.
The limit to the amount of audio plugins that can be used in a single song is not quantifiable and depends on the following details:
Yes, audio plugins have come to a point in time where their engineering has become equal to most hardware devices. Software also offers more flexibility to do things that hardware units sometimes cannot such as save your instrument/effect settings within a given audio project.