An add on domain is a domain that you can "add on" to your existing hosting account, without creating a new hosting account for that domain.

The domain will share the space and bandwidth allocated for the account, and will have it's own e-mail addresses, and ftp login. However, this domain will not have it's own cPanel as this feature only comes with a new hosting package.

A "resold" domain is given it's own package that contains specifications for the space and bandwidth for the that domain. Resold clients have more control over their accounts than addon domains, as they are also given cpanel.

If you plan on reselling accounts, a resller account is the way to go.
If you only wish to host a few sites of your own, add on domains may be a cost effective option if the diskspace and bandwidth requirements fit your needs.