Yes that is correct, except you will get alcohol in a starter. You are basically making a small batch of beer. It will be <4% ABV or so, but you will get alcohol. And it probably won't taste very good.
This may or may not be true depending on your starter method.
Basically the yeast make alcohol as part of the breakdown of glucose. It then in the presence of Oxygen break the alcohol down further for more energy. If you don't oxygenate the starter well (ie just make and let sit, put an airlock on, etc) then you will have residual alcohol.
If however, you put a loose (usually aluminum foil) cover on, and especially if you agitate it-either by hand or with a stir plate, then you will force CO2 out, increase absorbtion of atmospheric O2 and if left long enough, get the yeast to convert all the sugar carbon dioxide and water.
Back to the OP's original question.
Through experimentation, they've found the amount of yeast cells that are growable in a given volume -gravity combo of wort. They've also determined what is a good pitch rate. Under and over pitching create off flavors.
to make life easier, starters are usually figured at about 1.040 gravity - the 1.035 to 1.040 range giving the best growth rate vs gravity. This means you only have to calibrate the volume to get the desired yeast count for a starting batch.
In the case of step up starters, going from a vial to a 1L to a 2L will get you more cells than going from a vial to 2L. Off hand, I'd guess this is because you start with more in the 1L and give it a fresh jolt of wort to work off of - and more sugar in total, where as from vial to 2L, the yeast cells have to fuel themselves on less sugar and such - dang not explaining that well. Sorry, not enough caffine.
I strongly recommend reading "YEAST" by White and Zainasheff for more on this and pitch rates.