**Update:**

This answer is now mostly superseded by:

 * https://mathematica.stackexchange.com/q/132064/12

----

I am not sure about the difference between `"Kernel"` and `"Application"`, but I was able to gather the following information:

Adding the `"Kernel"` extension to `PacletInfo.m` allows the paclet to provide a [package][1] that is loadable with [`Needs`](http://reference.wolfram.com/language/ref/Needs.html). (I have not tried if `"Application"` works too).

In order for this to work, it seems to be necessary to set the `Context` and `Root` arguments, like so:

    Paclet[
        Name -> "MyPack",
        Version -> "0.0.1",
        MathematicaVersion -> "10.0+",
        Description -> "My Mathematica Application",
        Creator -> "John Johnson",
        Extensions -> 
            {
                {"Kernel", Root -> ".", Context -> "MyPack`"}
            }
    ]

Effects of setting ``Context -> "MyPack`"``:

 * ``FindFile["MyPack`"]`` will resolve to the correct location so that the package can get loaded by `Needs` or `Get`.

 * If the `"Documentation"` extension is also present, then symbol usage messages will get a little `>>` sign at the end.  Clicking it will open the correct documentation page.

 * The value can also be a list of contexts.

Effects of setting `Root`:

 * ``FindFile["MyPack`"]`` will search in the location that `Root` points to in the usual manner: it will resolve either to `init.m`, to `Kernel/init.m`, to `MyPack.m` (or I assume to the other usual possibilities such as `.mx` files within directories having names agreeing `$SystemID`—but I haven't tried this one)

    The usual setting would be `Root -> "."` when the package root coincides with the paclet root, but we can also put all the package files and an `init.m` in a subdirectory and point to that instead.

### Further reading

 - https://mathematica.stackexchange.com/q/131101/12

### References

 - https://github.com/WolframResearch/GitLink/
 - [This comment](https://mathematica.stackexchange.com/questions/28316/creating-cross-version-compatible-documentation-with-workbench/28349#comment90056_28316) by Teake Nutma
 - [Workbench Documentation](http://reference.wolfram.com/workbench/index.jsp?topic=/com.wolfram.eclipse.help/html/reference/projects/pacletinfocontents.html)


  [1]: http://reference.wolfram.com/workbench/index.jsp?topic=/com.wolfram.eclipse.help/html/tasks/applications/packages.html