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It's not a stupid question. It's certainly quite confusing!
Basically the way that it all works is as follows:
Your domain name leatherlollipop.com is listed (with all others) on the central domain servers for the whole internet. When someone requests your site in their browser, it is looked up from your ISP's copy of these servers (they synchronise regularly with the central servers) which tell the browser what DNS servers to look up.
DNS servers are run by your web host and actually point your domain to the webspace on their server.
Now, when you move web hosts, you request your domain to be transferred, not from one site to another, but for the DNS server for your domain to be updated.
So how the moving of your site would work is as follows:
1. You set up the account with the new provider. They give you your space and you upload the data. They also set up their DNS servers so that any requests for leatherlollipop.com are sent to your account. Nobody will be viewing your site on the new server at this point, though, as they are still being pointed to the old host's DNS servers.
2. You request a change of DNS server from your domain registrar. The central database is updated to tell new requests to go to your new site.
3. The changeover period. Over a period of about 2 days, ISP servers around the world re-synchronise with the central servers. Once they have new data, requests are sent to the new host's DNS server (hence the new version of the website). If they haven't updated yet, requests are sent to the DNS server still on their records (the old host, hence the old version of the site)
4. Removing the old data. After 2 or 3 days (I'd probably leave it a week) all ISPs should have updated their servers. All requests for your domain are going to the new DNS servers, so all the visitors are going to your new site. You can now cancel your old account (and your old host will delete your site and remove the record from their DNS servers).
I hope that explains it a bit better. It's a complicated system, and can cause a lot of confusion, especially when the time for ISPs to update their servers can take a while, meaning that half the world is going to one site and half to the other. Actually doing this isn't difficult, though. It's simply a matter of:
1. Sign up for new account and set up as normal
2. Request domain transfer
3. Wait
4. Cancel old account.
Hope that makes it a bit clearer!
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