2.) The header slider module(s)
Every slide is a stand alone moduleposition called header1, header2, header3...header12. If none of these 12 modulepositions are in use, the slider area disappears completely. If you setup just one moduleposition it will load just this one static module without the sliding navigation. If you use more than one of these modulepositions (for example "header3" and "header5") the slider area will load the first module on show the navigation to "slide" to the second one. You can use the 12 modulepositions to setup what ever you want.
For example: A image, a text, HTML code, a video or one of the thousands of free and commercial Joomla modules out there.
3.) Header Slider Configuration
As mentioned before the slider area will be activated automatically as soon as you publish a module on position "header1 - header12".
But you can also setup and change some basic settings from the templates config screen. To access the config screen click on "extensions->template manager". Select the template from the list and hit the "edit" button in the upper right corner. The templates config screen will appear. Inside the right column you can setup the hight, the duration between two slides in milliseconds, the positions of the navigation elements and you can choose one of two different effects (slide horizontal, slide vertical). And the configuration lets you also activate/deactivate the "auto play" function and edit other template related options.