A question about external harddrives

[Rye]

I'm not terribly clever when it comes to actual computers, so I wanted to ask about external harddrives.

My HD is kind of small. Vista hogged up a lot of space, so I only have 100 GBs of actual space... and now I'm down to about 10 GB since I downloaded Sims 3. If I get an external HD, and I put things like games, photoshop, videos, and music on it, once it's plugged in, can I use everything as if it was on my computer as is, or is it just a storage system? Like, for example, if I put a chunk of my music on it, and plugged it in before I plug my iPod in to be updated, does that still work and will the music go onto it? That sort of thing.

I dunno how dumb of a question that is, so spare the snarkiness if it is.