Bukkit is a developer API - it basically provides hooks and functions that developers can use to plugin to Minecraft.
Craftbukkit is the server component you download that lets these plugins work with the official Minecraft server.
Craftbukkit is not yet a package manager, rather a server wrapper - plugin installation and managed updates are planned through another tool (fill.bukkit.org) but it has not yet been released - Bukkit itself is still under heavy development.
So, to answer your three bullet points:
What Bukkit does that vanilla Minecraft Server does not
Bukkit on its own does very little – it simply exposes an API that can be used by developers to add functionality to the game.
Why people decide to use it over vanilla Minecraft Server
People generally use it because of the additional functionality that can be added through plugins: area protection, a form of economy, the ability to warp throughout the world, and making minecarts more stable. A quick browse through the Bukkit plugin releases forum will show you some more possibilities.
What plugins do/are for
I think this is answered through the other two – they add additional functionality to the game. :)
Best Answer
"PvP Logging" describes the practice of logging out during PvP when it looks like you might lose. It isn't unique to Minecraft, but occurs in all competitive games where losing in PvP incurs any kind of penalty, even as slight as simply increasing your "death" count, thus reducing your kill-to-death ratio. In some cases (such as in Minecraft) simply closing your client or quitting the game instantly logs you out, even in combat; for others, it's a bit more complicated, but people found ways regardless.
There are a few plugins for Minecraft servers to combat this behaviour, like CombatLog and PvP Tag for Bukkit. They all have the problem that the Minecraft servers can't discern between someone trying to log out to save their hide and their clients simply crashing. As such, those plugins can lead to unfair situations as well, especially if somebody finds a way to crash someone else's client.