In addition to the information provided by Pankaj, here is my view on this:
You need to install Fredhopper separately from SDL SmartTarget. However, as Peter points out in the comments, this can be done before or after SmartTarget, as long as both are configured correctly afterwards.
Fredhopper is an 'engine' that was traditionally used on eCommerce sites to provide intelligent navigation, search (including faceted search) and product listings.
SDL SmartTarget is a relatively new product (compared to Tridion and Fredhopper) that provides an integration between Tridion and Fredhopper. It makes use of the Fredhopper 'engine', to extend on the tradition eCommerce functionality, and provide targeted/personalised content for your website end users.
Installing SmartTarget provides an extra 'Targeting' interface alongside the Tridion Content Management Explorer (CME) that allows users to create
Promotions for this targeted content.
It also provides some functionality for adding the Promotions and targeted content into Fredhopper, as well as a dedicated SmartTarget API for querying the content...
... but, the Fredhopper Application Server (FAS) has to be installed separately.