Your confusion is s common one.
The Butterfly effect comes from the study of what is called non-linear dynamics or more commonly chaos theory.
This shows how large events can be changed by infinitely small ones. Tiny perturbations can trigger large events. The famous example was given that the flap of a butterfly's wings in brazil causes a tornado in Texas.
You'll have seen all this in Wikipedia I'm sure.
Now the complication is that Ray Bradbury had earlier written a story called "the sound of thunder" in which a time traveller changes the present by destroying a butterfly in the past.
Now in a sense this is still an illustration of the butterfly effect but on a broarder sense. Almost a metaphorical one
Normally the butterfly effect relates to a physical system - like an atmosphere or a set or planets orbiting a star or even a double pendulum
Check this out
http://www.youtube.co...Tut6A&feature=related
You can never get such a device to behave exactly the same way twice because of this effect.
The sense of the butterfly effect you are talking about regards all of the planet as a single interrelated system where a small change affects everything.
Hope that helps more than confuses