Wifi tethering and hotspot are different in my mind.
Wifi tethering is for using a phone connected to another device (usually a laptop) via Wifi, to use the phone as a 3G internet modem for internet access anywhere you have a signal. Its quite useful if your in the car, or in an area where you don't have conventional landline internet access.
A hotspot is an area in which the public can use their wifi enabled device to access the internet.