Your web host will decide if you can use a domain name - all paid hosting companies allow them, as far as I know. But if you want free hosting, using a domain name is often not allowed. You'll get a domain such as http://members.somefreehost.com/yourname where "somefreehost.com" is your hosting company, and "yourname" is the user name that you chose when you signed up.
When you choose a domain name, think about your keywords, and try to include them if possible. If you're starting a new business, choose a name that describes your products or services. If you have an established business, you'll want to try and get the same domain name if possible.
Don't use the online search tools - I've found that the names I've done searches on have become unavailable after my search. Companies have bought up those names in the hopes of selling them at a premium. You can download a domain name analyzer here: http://www.domainpunch.com/products/dna/
Domain names aren't really "bought" - the domain you choose is only yours for a short time. A .co.uk name is available for two years before renewal; other domains such as .com are available for up to ten years, depending on various factors. The cost also varies according to the top level domain.
The "top level domain" is the last part of the domain name - for example, .com, .co.uk, .ca and so on. The top level domain that you're allowed may depend on where you live - for example the "country" TLD's such as .co.uk or .ca will only be issued to people or businesses in that country. Different TLD's have different prices.
You may choose your local TLD - some people prefer to do business within their own country, especially if they're buying goods. On the other hand, .com is the most well-known (and well-used!) TLD - if people aren't sure of your TLD, .com is the one they'll probably try first. So budget for both your local and the .com TLD - you'll reach more visitors that way.
My domain registrar sends me reminders several weeks before my domain will expire, so that I can cancel if I want to, and check that my credit card details are OK if I want to renew. Not all companies do this - but loosing a name because you forget to renew is now much less of a problem than it used to be.
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