When you make a connection to a remote computer you need two things, an IP address and a port. Think of a port as one door of many doors on a computer. There are 65536 ports to be exact, but you can't use 0. On the other side of each door is a service waiting to answer the bell. When you connect you need to specify what door it is that you want to knock on. Now, go look through this: http://www.iana.org/assignments/port-numbers
That is a list of ports and the variuos programs that may or may not be listening on a given port. You should memorize the first 100 for sure, others you will just come to know after a while.
So... Back to your question, telnet lives on port 23. But telnet is a very versitile client. You can use it to connect to a webserver (port 80) and look at webpages in their raw format, you can connect to irc (port 6667) and chat with people, you can connect to smtp (25) and send emails... The list goes on and on.
Now as far the term type goes, that means terminal type. Way back in the day the way things were done a lot was to have a mainframe computer with what's called dumb terminals attached to it that people used to do their work. These dumb terminals were basically just a screen, a keyboard and a wire coming out the back into the wall to the mainframe. And just to keep it interesting there is of course more than one type of dumb terminal. Since the finer points of the differences are prolly not something you care about, or me for that matter, just use vt100 and be done with it. If you really are that curiious then go to google and search for em.
And just for note, Yahoo is not going to take to kindly to you using there server to mess atound on. You might want to try and find a server of someone you know who will let you play around.