Difference between virtualmin and webmin?

Oh, so if webmin is for system administration of the box, why does the domain user (the lowest level user) have access to it? Is it a stripped down version of webmin where their changes affect their domain only?

Yes, the Webmin modules (when you, as the root-level user, grant them access to them) provide a domain-only view of the data, allowing the domain virtual server account holder to perform more interesting operations from within the UI (that they might have to perform from the command line, or might not be able to do at all, under some other control panels). It's just an added layer of flexibility. It isn't strictly necessary for you to grant access to any of the Webmin modules; but doing so allows users to configure things like htaccess file rules, web redirects and aliases (above and beyond simple Alias domains that Virtualmin handles), DNS zone additions and modifications, etc.

Though I should point out that it's not really a "version of" Webmin; Webmin is the same code across all users on the system. Virtualmin uses Webmin's really powerful ACL system to grant (and deny) access to various aspects of version Webmin modules, specifically those that would be useful to end users, like the Apache module and the BIND DNS module and the database management modules.

The default configuration of Virtualmin attempts to be safe for mid to large-scale shared hosting with semi-trusted users (i.e. users that are not anonymous, because you are billing them, and their account can be cancelled if they abuse the system in any DoS sort of way). For smaller, more trusted, hosting (such as in a "friends and family" server or a "company departmental" server) you could open it up a bit more, and grant more access to the various modules. For more anonymous (such as free hosting), you'd want to restrict it dramatically from the defaults; and of course, you'd also turn off a lot of features, because free hosting cannot be provided with the default Virtualmin level of service as it would be too expensive, due to mail processing, in particular.

Anyway, the Webmin menu is less used by virtual domain owners; in fact, they never need to even look at it.

For root-level users, you may find you spend about 15% of your time in that menu, maybe less, if it is a dedicated virtual hosting server (i.e. you don't use it for anything other than hosting). During configuration and tuning, you might spend more time there, but the Virtualmin menu is designed to make the tasks in virtual hosting fall right under your fingers, one or two clicks away, rather than buried down under the many tiers of menus and icons in the Webmin menu.