The term “hosting” doesn't describe just one service, but a number of services that offer a variety of functions to a domain. Having a site and emails, for example, are two independent services even though in the general case they come together, so a lot of people think of them as one single service. The truth is, each domain name has a couple of DNS records called A and MX, which show the server that handles each particular service - the first one is a numeric IP address, that specifies where the website for the domain address is loaded from, while the second one is an alphanumeric string, which shows the server that deals with the e-mails for the domain. As an example, an A record would be 123.123.123.123 and an MX record would be mx1.domain.com. Each time you open a website or send an email, the global DNS servers are contacted to check the name servers that a domain address has and the traffic/message is first forwarded to that company. When you have custom records on their end, the browser request or the e-mail will then be forwarded to the correct server. The reasoning behind working with separate records is that the two services employ different web protocols and you could have your website hosted by one provider and the e-mail messages by another.
