Application can be explained as a set of modules that work together. But, tehnicaly.. it it aslo a module... to be precise.. Application is a "main" module for a group of modules wich work arround simmilar business object (sale, purchase, warehouse, accounting...).
Example :
Accounting and finance application, is tehnicaly account_accountant module, but it can be extended with more functionality by installing other modules (account_chart, account_cance, account_followup...) . Application usualy defines major security groups
(for accounting : Invoicing and payments, Accountant, Financial Manager)  and modules that extends accounting application use those major groups, but can also define extra groups...