The Desktop Environment is the graphical user interface (X server with KDE, Gnome, Unity…) where applications run.
A Virtual Terminal (VT) provides an interface for the user to log in and work. You can switch between VTs using the Ctrl+Alt+Fx shortcuts. They are usually text based.
Setting “nomodeset” disables KMS. Kernel Mode Setting (KMS) provides faster mode switching for X and console. It also provides native-resolution VTs on some laptops and netbooks which, prior to this, would use some standard mode, e.g. 800×600 on a 1024×600 panel.