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Understanding medium farm architecture

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Following is an image which is available from Project Server 2010 tutorials from Microsoft website. It describes the "Medium Farm" architecture for Sharepoint/Project Server.

http://i.imgur.com/uMDUOYU.jpg

It has following components:

1-N WFEs
1-N App Servers
1 SQL Instance

What I am confused about is WFE and App Servers being on two different machines. The only type of farm installation I have done so far is the one where SQL Server resides on one machine while Sharepoint resides on another. My questions are:

1. Does WFE stands for Web Front End? So basically this is the computer where IIS will be running?
2. App Server means a machine where Sharepoint will be installed?

So basically we will have a server running IIS while another server running actualy Sharepoint or is it something else?

Secondly I want to know how can you do this type of installation? Because I didn't see these options when doing installation from standard GUI so I guess such an option is only available using Power Shell?


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