your first question really depends on your hosting account.
there are different types of hosting accounts.
One type of account is for one site only. another hosting account type would allow you to create multiple sites in one account.
If you have an account type that allows you to create multiple sites under it, then you will also be able to create multiple databases for each site.
Just to confuse things a little more, it is also possible to create multiple databases within one site, but I don't recommend that.
The Database connect tool creates a connection to one database, so if you have multiple databases, you will need a separate connection for each.
The purpose of the Dynamic Connection tool is:
To Create one Connection file that connects to a database on your local server and also on your live server. it dynamically detects the server from the address, then uses the correct database connection details for that server.
