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Adobe AIR is a desktop runtime -- a "program" that runs on your computer and itself runs other programs. It can be compared to Flash Player for the web browser. You can view plain HTML pages in a browser without needing anything extra, just like you can run native programs on your computer without needing anything extra installed. However, some web sites include Flash content, which only runs in the browser with help from Flash Player. You never "run" Flash Player by yourself -- it is run automatically by the browser, and it runs SWF file content (video, ActionScript code, etc.). Adobe AIR is used to run desktop applications rather than content in the web browser, and just like a SWF file doesn't run in the browser without Flash Player installed, an AIR application won't work on your computer without Adobe AIR installed.
So for your purposes as an ExtendStudio FlexiPanel user, you can just think of AIR as something that your computer needs in order to run their application, just like Flash Player is needed to view certain web sites.
Adobe AIR is used to create standalone desktop applications. (I believe) it can also be used to create panels that run in Creative Suite applications like Dreamweaver, as well as standalone applications that communicate with Creative Suite applications. I assume that's how ExtendStudio FlexiPanel works, and why it requires Adobe AIR for part of its functionality. While I don't know for certain, I'm pretty sure that the output created by FlexiPanel is just CSS and maybe HTML, so it will run in any web browser and doesn't require Adobe AIR (or even Flash Player) to be installed on the end-user's computer.
As for the second question, ExtendStudio would need to answer that one. (Maybe someone from ExtendStudio reads this forum, but perhaps not.) If in fact they are using the Adobe AIR communication with Creative Suite, then I'm pretty sure that it requires CS4. But my impression from their web site is that AIR is only used for one part of FlexiPanel, so maybe the other parts would work in CS3...but again, they would know for sure and I'm really just making guesses based on a very small amount of information.
Thank you very much. You answered both my questions appropriately and I
understand everything you said.