from Ackbarr: Templates control the layout of a module's content, whereas themes control the overall appearance of the site.

from Herko: To be more exact then ackbarr, the theme is uploaded manually to the theme folder in your XOOPS root dir. To change the styles and look of your whole site, download the standard theme, and edit it offline to fit your taste. Then upload the theme files to the themes folder (naming the folderlike: themes/humbrietheme/theme.html etc.).