Regular home is still an application, I believe. It's the GUI that lets you manipulate everything. The only other way to have your phone be usable would be through a shell or terminal.
HTC Sense, Openhome, dxTop, etc are all home replacement applications that sit on top of the existing framework.
Someone can correct me if I'm wrong, that's just my basic gist. I'm sure someone else can provide a more technical explanation.
The volume control is AudioManager Widget.
AudioManager Widget v1.0.6 Application for Android | Multimedia