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Hosting multiple sites with WordPress - How to...

I'm very new to WordPress and have some questions on exactly how it works in a multi-site environment.  I'm very familiar with IIS and how to run multiple sites off a single IP but I'm not exactly sure how WordPress "integrates" or if that is the correct term to use.  

After a lot of research, I've found a few articles on setting up WordPress 3.0 for Multi-sites but where U get lost is, is WordPress a "web server" or what?  In other words, with IIS we have to setup separate sites for each company (www.companyA.com, www.companyB.com, etc.).  From what I've gathered, a single IIS site is setup for WordPress itself and all " comapnay sites" are setup within the sites configuration of WordPress.  Then, with the domain mapping plugin, we would be able to publish the sites using dns names such as www.companyA.com and www.companyB.com, etc.  Assuming all this is true, I configured a site (wordpress.company.com/companyA.  When I looked at the settings for companyA, the Upload Path states wp-content/blogs.dkr/2/files.  Is this where the website files would go?  Basically, I'm not sure how someone building WordPress sites would get the site content so people could view the sites.  

Thank you for any and all guidance!
2 Solutions
The blogs.dir/<id>/files is location for the images. The webpage is generated by php dynamically from the database. <id> is a number of the blog. 2 is the 2-nd blog you created there.
Wordpress is not a web server but application that works in the web server.
Wordpress handles some webserver stuff such as URI/Domain mapping and so on.

As for IIS - i'm not sure how to run wordpress under IIS, because it creates lots of rewrite rules for apache server in .htaccess file.
If you just install apache under windows the wordpress will run out of the box.
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