Most newer Android tablets provide both WiFi and WiFi+3G variants.
If a tablet is WiFi only - then yes, the tablet can only access the internet via a WiFi hotspot/network.
If a tablet has 3G capability as well, then yes - a SIM and data plan would be needed to use the 3G functionality, but not required to use the tablet. The benefits of using a 3G model would be that you always have an internet connection, even if there isn't a WiFi network available (as long as your mobile network has coverage where you are).
The 3G system in tablets is the same as in phones - except that most 3G enabled tablets don't have the ability to make voice calls, or send SMS's - they are limited to using only the internet through the 3G network.
3G tablets are more expensive than the WiFi only models - mostly costing in the region of ~£100 more, however the benefits can be rather useful - especially if you would be using the tablet out and about alot.
However, if you possess an Android device as well, then you could just purchase a WiFi only model, and use the Portable Hotspot feature of your Android phone to create a WiFi network that the tablet can connect to, to use the 3G internet of your phone.
So, in conclusion:
- 3G tablets can be connected to the internet practically everywhere
- 3G tablets can cost around £100 more than WiFi only varients
- WiFi only varients can only access the internet when a connectible WiFi network is present
- A SIM and data plan are needed to use 3G data on a 3G capable tablet - this will cost extra
- 3G tablets are ideal for those that will be taking them out and about with them, and would need an internet connection while they are out and about with their tablet
- WiFi only tablets are ideal for those that would only be using the tablet indoors that has a WiFi network available, or for those that wish to to the WiFi Hotspot feature of their Android phone.