LaTeX is pronouced like "Lay-Tec". It is a "programming" mark-up language used for type setting and document formatting. The Official LaTeX site has a much better explanation than I can give you. I find it refreshing. It does have a bit of a steep learning curve so this may not be for you. If, however, you want complete control over your document instead of having to fight to get the page numbers just right or the figures to stay in the same place all the time, or for whatever other reason, LaTeX is for you.
You can use any text editor and compile it separately. There are many programs that combine that functionality and even put a GUI with it. I have tried many programs that are specifically LaTeX editors. One being LEd which is for windows and the other being Kile which is open source and runs on GNU/Linux. For a program running in the MS operating system, LEd is actually very well done. However, it is in beta last I checked. So, my most recent favorite is TexMakerX. Really any text editor can be used. I like the Notepad++ editor for many uses and it is great for LaTex as well. However, I recently found Sublime Editor in which I am truly impressed. There are some great features. If you are of the wysiwyg ("what you see is what you get") variety then Lyx may be for you. I don't like the feel of it but I know many who like it. I suggest you try several programs, there are many more than those I have listed here, and use which suits you best.
I also suggest using a bibliography editor. I happen to not like BibTex but there are many available. There used to be one called Bibedit. I am not sure where it went but it has disappeared. Bibliography editors help you sort, enter and keep track of papers, articles, etc.
I have tried three separate Tex packages in the past. I have used the MikTex package for MSWindows (several versions of that OS). I also have used both the teTex and TexLive packages in GNU/Linux. All work fine, try one and see if it works for you.