I am getting very confused between these two terms. Please can someone give me a clear explanation of the two, with some good examples?
Room tone is background audio, recorded on set, during production, using the same microphone that is used for dialogue. It is used for filling holes in the production audio that are created during dialogue editing, or replacing unwanted noises (during non-speaking moments) in your production audio.
Backgrounds and atmospheres are recorded separately and/or designed to reflect the location.
A good example would be a scene in a dance club. A club typically has music and lots of people making noise (either through speech or dancing). You wouldn't shoot it that way, because you might sacrifice intelligibility of the main characters. Instead, it is shot with no music, and everyone else in the scene remaining as silent as possible. The room tone reflects the recording conditions, the background/atmosphere is cut in by an editor and what you will hear in the final version of the film.
You seem to be posting a lot of questions about basic practices over the last few days. I suggest you grab a book or two to help you understand these concepts and how they intersect. Two good starting pieces are The Practical Art of Motion Picture Sound by David Lewis Yewdall and Producing Great Sound for Film and Video by Jay Rose. People here are very willing to share their knowledge, but most of the questions you're asking require extensive explanations. Many of us simply don't have the time to give you those kinds of answers. Get a grasp of some of this information, then come back and ask for help with clarification on anything that is still confusing. You'll get a much wider response from people.
Hope this helps.