What does it mean based on Debian/Ubuntu?

My question is about the term of “based on Debian” or Debian’s child. I interpret this as an indicator that the system for example – all the packages and its ‘system equipments’ derived from Debian – so the Debian backgrounds with some modifications based on the Debian but with a different GraphicInterface.

I came up with this question when I decided to setup Debian and also the Parrot OS as different boot options. But in that case I can reach all the necessary programs through modifications from Debian without installing an entire OS.

What does it mean Packaging System? Is this related to the Kernel which can be directly reached though terminal ? So is it about how to handle data on byte-level or bit above?

Could somebody help?