I have read that unity would be a plugin of compiz. Does it mean that when I uncheck Unity from the CCSM menu, I would be greeted with Conventional Gnome or may be Gnome shell.
The version of Unity that will be released in 11.04 is definitely implemented as plugin(s) in Compiz. (I've seen it with my own eyes...) This is described in a little detail in the blueprint on Launchpad.
It will also certainly be possible to use convential GNOME or the GNOME Shell, though perhaps not in the manner you describe disabling the plugin. It is more likely to be an option at the login screen (if you have it installed).
Compiz is a compositor. It manages how windows are displayed within the X server. A side effect of this is it can do fancy things with windows and the desktop (which is essentially another window). At its core, Compiz doesn't actually do that much interactive stuff, rather handling things for other applications.
It isn't even a window decorator (though it does control which windows are decorated and by what).
Unity is a shell. It's just an application that lets you use your computer. It's like the standard panels... obviously it works differently but it has much the same role.
The confusion between Unity and compiz comes from Unity requiring a heavy compositor to do many of its fancier effects. But Unity is discrete and essentially it wouldn't need to be compiz that handles the effects.... That will be especially true if/when Wayland comes along with its own built-in compositor.
Despite the fact that Oli is being marked down, he is mostly correct. Unity is a Desktop Environment--a shell. Compiz is a compositing manager (http://www.compiz.org/) which can also be used as a window manager. There has been some talk about new releases of Unity being implemented as a Compiz plugin, but I'm not sure that is any more than semantics.
In fact Unity only recently switched from Mutter to Compiz (http://www.webupd8.org/2010/10/unity-to-use-compiz-instead-of-mutter.html).
http://ubuntulinuxtipstricks.blogspot.com/2008/12/compiz-emerald-metacity-what.html contains further information about what is what.