Paracord is kind of like a shoelace - it's a nylon fabric tube with several double strands of essentially more nylon monofilament inside. A shoelace is typically on the order of poly fill in terms of strand diameter - really fine stuff, while paracord is more like lightweight fishing line piled together. The number refers to the nominal breaking strength in pounds, apparently 550. I doubt that you could break it just by hanging 550 pounds from it, but I think that's where it transitions from elastic elongation to inelastic elongation, abruptly leading to failure.
I believe it's called paracord because at least the same design, if not the same exact material, was/is traditionally used for modern parachute canopy lines. Because of the construction, you can yank the core out and use the nylon as webbing (like a shoe lace, torniquet, etc.) and the core material makes suitable repair sutures for fabric (not sure if I'd stitch up the fabled sucking chest wound with it... yowch when you try to remove it!) or even, *Gasp* as fishing line!
As far as I can tell, the "real stuff" is outlined by MIL-C-5040H, and there are several types, and type III is your 550 para cord that everyone talks about using here for boot laces and the like. The other stuff has varied breaking strengths, and you can read all about those in the MIL.STD specifications.
Here's the wikipedia link:http://en.wikipedia.org/wiki/Parachute_cord
To answer my own question from a few posts ago, after doing a bit more research, I think I'm going to stick to "real" static rope for my emergency egress kit, even though it's a bit bulkier, since it's rather inelastic, and has a much higher breaking strength - thus if I fall, it'll catch me instead of snapping like a guitar string. The dynamic loads associated with a fall can greatly exceed one's own body weight after just a short slip, and the abrasion resistance of the para cord is not quite up to par as compared to "real" climbing rope with a canvas tube protector around it near the high-side anchor.
Totally digging the paracord for lowering my stuff down or as an extension line for when I just can't quite reach the ground/fire escape/etc., but the kit will be built around 150 feet of static line rated to something like 4000 pounds or more. 11.5mm rope IIRC - going to order it in a week or so.