
Combine these terms and you get "sysMMC OFW" aka Stock. This is commonly shortened to just OFW and means a normal out of the box boot mode using the soldered, physical chip.
Combining different terms nets you "emuMMC CFW" aka Modded. This is commonly shortened to just CFW and means running a modified version of HOS from a microSD card.
You'll notice there may be other combinations of terms possible. There are, and the resulting boot modes can usually be ignored by most people.

Picofly is a kit, a collection of parts, that work together on all variants of the original Switch (not Switch 2) to allow free filesystem access. Because of this, the kit does not need a "blank" or reset device to start from, you can keep your saves
The Picofly kit mainly uses a controller chip called a Raspberry Pi. The controller chip convinces the Switch to potentially:

Yes
The only danger comes from installation of the mod.
Soldering and modifying the thin and delicate circuit board can ruin it. The points are tiny, there's often grinding, and dangerous fumes. Spicy pillows are possible.
Sagebrush Repair has over 16 years experience improving our microsoldering skill, so good job finding us.

The above bullet points are always true until you mess with the other two modes.
More details:

A community effort to provide accurate instructions for bespoke CFW installation exists here: https://switch.hacks.guide/user_guide/modchip/
Sagebrush Repair