As George said, you basically have the idea. A projector is a copy of your SWF wrapped together with an executable player, so that it can be played anywhere.
To expand on George's answer, projectors have the following differences from SWFs:
- SWFs are inherently limited to accessing either the external network or the local file system, but never both. Projectors can read local files and also make net connections.
- Projectors have some rudimentary functionality for running local processes. If you make a folder called "fscommand" and put it in the same directory as your projector, your projector's content can run batch files in that folder. There's no way to ever execute a batch file or run a local program from inside a SWF.
- I assume, but haven't tested, that cross-scripting restrictions do not apply to projectors - i.e. loading in an external SWF and running methods or accessing variables inside it. I'd be wary of relying on this for AS3 though, as projectors aren't used so much these days, and may not have gotten much attention in the AS3 era.
There used to be a couple of other differences, regarding fscommand features that were only available in projectors, but I don't think any of them apply to modern players.