A language pack is an extension that provides an additional UI localization for Firefox. There's not built-in UI to switch languages, though, so you need a language switcher add-on, or do it via about:config.
You shouldn't need a language pack in general.
Dictionaries are, as you said, word-lists (basically) to be used by the spell-checking engine we ship in the product, to spell check in text areas etc on the web. The engine we use is hunspell, in case you wonder.