I agree with you, this is not very clear and I will submit a request to improve it.
See below some additional information I was able to get from the developers:
A stream shows you real-time updates of activity as people interact with content, people, and places in the community. You can see all public activity in the Activity Stream, or create your own custom streams that show only the people, places, and content items you select.
You'll see a new stream item as people interact in your community, for example, create a document, reply to a blog post, post a status update, download an App, and so on.
A stream item is created when people interact with content, people, and places in the community. Here are some examples of activities that trigger new stream items:
• Content: someone modifies the content item, for example, edits, comments on, or replies to it.
• People: someone posts a status update, creates a content item, comments on a content item, and so on.
• Places: someone updates content in the place, for example, publishes a new document, edits a blog post, or comments on a document that lives in the place.
• Create an Email Watches stream and set email notifications to On for only that stream. Then, only follow critical items in your Email Watches stream. This stream can be helpful when you're away from the community for a few days or if you want to watch something that you haven't directly participated in (if you had, you'd see those updates in your Inbox).
• Set email notifications to "On" for your Inbox (direct social actions) so that you'll get an email any time someone @mentions you, sends you a direct message, or shares something with you. Note that if you set email notifications to On for Inbox (everything in my Inbox page), you will receive an email each time someone posts an update to an item in which you were previously @mentioned or that you participated in. This can get overwhelming quickly; we recommend setting email notifications to Off for Inbox (everything in my Inbox page).
Thanks for your feedback and I hope this helps,