SharePoint supports both path-based and host-named site collections. The primary difference between path-based and host-named site collections is that all path-based site collections in a Web application share the same host name (DNS name), and each host-named site collection in a Web application is assigned a unique DNS name.
When you create path-based site collections, you must create the URL for each site collection by starting with the host header path defined by the hosting web application, where the URL to the site collection is the combination of the protocol, host header, the managed path and the name of the site collection. In order to have different host names, multiple web applications are created by configuring managed paths
Host named site collections requires you to create the hosting web application without the traditional host header path. The managed paths used by host named site collections are not configured at web application level but on a farm level.