You are correct. The modem plugs into a standard 110 outlet and comes with an adapter the connects to the Hydroflash serial port. The 2634-222 would connect to an outlet as well.
If both are on the same phase of your power system they will communicate through the wires (which works awesomely). If they are on different phases the dual band kicks in. Dual band allows the devices if on different phases to still connect, however, the dual band can be range limited. Not sure how far your fountain is away from the HF. Range is listed as 150 feel line of sight. If you have a cinderblock wall that will, of course, reduce your range.
I hope you have as much fun playing with all the different things Insteon can do. And now that we have events you could probably even have the fountain turn on only when someone is near it.

So much FUN!