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Options change the behavior of a program. For example display number of bytes or a human readable format. Parameters are the objects that a program acts upon. For example in "mv File_1 File_2", the files are parameters.

A control panel is a where you can set options. For example your screen can be set to one of several resolutions. A manager is a where you modify data. Cupsys and Swat are managers since they manage which printers you print to and which directories you share.

/etc/ is the place to put configuration information for programs. /var/ is the place to put the data that the programs work one. Therefore hosts.cfg, the file that lists the hosts Nagios should monitor, should be located in /var/lib/nagios/. nagios.cfg is located properly in /etc/nagios/.