Altering a form means adding or change any forms in a module. In Drupal 7 form alter could be done using the function hook_form_alter()
Being a fresher to Drupal, your first step is to focus on the Coding Standards In Drupal 7. Drupal community is very serious about coding standards. Entire source code should follow the current standards, regardless of the (core) version.
User permissions are permissions that allows or restrict the user in accessing a feature. We can define our own permissions in our custom module using the hook_permission() function.
An entity is a useful abstraction to make grouping together of fields. Here I am giving you a brief view about how the custom entities created, adding extra fields, adding bundles etc all things attached to entity.