You are basically right, a HDR image contains a very big color range ( you can not see this on your monitor, because a monitor is only capable of displaying 24 bit ), so it is very useful for example to lit a scene...or anything else, bacause a good hdr image can mimic the environment (where the image was taken). So for example you wrap a hdr image around your scene switch on radiosity.. and there you go ... You can even turn off the lights in your scene if you want to.
Like sod said (hehe it sounds good
creating a good hdr image is not too easy. One way to create one is to get a mirror ball, and make some shots of the sorrounding environment reflected in the mirror ball with different exposure settings. Then combine the images in a program like HDRShop (
www.debevec.org).
OGIVA : Your picture is nice, but it seems to me, that you have only used a hdri for a reflection map. Try to lit your scene with a hdri too.