Commerce Add-on provides a purchasable entity that can be used for adding generic order items. Think of it as a way of selling "upgrades" or "features" in addition to a main product or package.
This is not like Commerce Product Add-on. The Commerce Product Add-on module allows you to additionally sell existing products. For instance, you could sell a T-Shirt and a Membership as an add-on. Both are existing products with their own add to cart forms.