Yeah, it is confusing. Why? Because Japan likes to give you options and let you spend only what you really need to spend.
But the fact is, that if you don't know exactly where you are going on your trip to Japan, you should probably buy (before you arrive in Japan) the JR Rail Pass that encompases almost all of the country. It is really one of the best ways to get around with backpacks and a small piece of luggage on wheels. If you only take 3 trips on the Shinkansen (Bullet Train) it will likely have paid for itself.
Now, if you're really savvy or just want to travel the Setouchi region, JR West sells a JR Rail Pass for the Setouchi! On this trip I bought the Hiroshima-Yamaguchi Area pass that allows travel from Fukuoka (Hakata Station) to Mihara Station by Shinkansen and a final stop by local train at Onomichi Station. Onomichi is quite the destination it seems!
Added bonuses of these regional passes from JR West:
1. You exchange them at the JR West ticket counters instead of the crazy long lines for the regular JR Rail Pass.
2. You can buy them IN Japan (but must pick them up from certain stations)
3. They are much cheaper and can come in quite short periods.\
4. You can pass through ticket gates like a normal person via an actual ticket (regular JR Rail Passes must show the station attendant before proceeding, there may be lines at busy stations)
5. SOME passes will let you use the Nozomi & Mizuho Shinkansen (regular JR Rail Passes does not)
Yes, it is confusing! Email or post a comment with your questions!