You're correct in that the book focuses on on-premises installations of TFS. We refer to Visual Studio Online, but not in great depth.
There is a lot of information online about how to get started with Visual Studio Online. The best place to start is probably at the source - visualstudio.com
In answer to your specific questions, configuring it is all done online, and there's very little to do. It's all running on hosted infrastructure so you don't need to worry about any of that. When you sign up, you'll get a single Project Collection (DefaultCollection) and you can create as many Team Projects in that as you need. Authentication is provided by Microsoft Accounts and Organisational Accounts (Azure Active Directory).
There is no ability to connect to SharePoint, nor are you given access to any underlying SQL databases.
I hope that helps!