I am new to all this and I am confussed about this C Store thing.
Do you have to buy the points with real money and then have to earn the money to use them in the game.
Please explain this to me.
You've got the gist of it.
It's becoming a more popular trend with Subscription-based games (even WoW is slowly getting into the market, though at the moment the only thing they're offering is non-combat pets) as the rise of FTP MMOs using the Cash-Shop only revenue model increase.
However, Cryptic has been doing an alright job so far making sure that nothing game breaking goes into their cash shops (usually just nice glitz and glow, if Champions Online is any indication on what we can expect in the future).
I think the conversion rate is... 1 to 100? Someone else should probably verify that.