You'll need an Extension Kit if:
a) you want to control hot water by replacing an existing programmer or controller in your system, or
b) you don't have a thermostat in your heating system or are replacing a wireless thermostat. The Extension Kit can then be wired directly to your heating system. And it will act as a wireless receiver for the Smart Thermostat.
As the name suggests, the Extension Kit can only be used as an add-on along with the Smart Thermostat. And only one Extension Kit can be installed per account.