A template set, is a set of html files, which govern the design and layout of your content.
Template sets can be made to work with a specific theme, for which the template set cloning function comes in handy. Instead of creating all templates from scratch, designers can take the existing, and modify them to match their layout and design ideas.
Template sets consist only of HTML files. The styles (CSS files) are delivered by the theme, though designers may apply styles directly to the HTML files, while this is not recommendet from a standards and specifications standpoint, as it makes the code "unclean".