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Marx believed that the each of the major social/production systems (slavery/feudalism/Capitalism) held within itself the seeds of the coming system. Marx believed that Capitalism was a step on the way to socialism. Capitalism, however, alienates the workers from their production. As we have seen lately, Capitalism doesn't always work. Parts of the society (owners) tend to take a large share of the benefits of the labor of the workers who get less and less of the benefit of their labor. Eventually, in an extended downturn where the people could no longer get even subsistence benefit from the society, they would revolt and establish a socialist system where everyone's needs would be met through their work, the system we refer to as socialism ... from each according to his ability, to each according to his needs. We would move from the state of alienation to what Marx called a state of his "species self" where awareness of all our needs replaced our individual needs.
Communism seems to me to be a political system based on the socialist philosophy; it often appears to be controlled by a power, and perhaps ruthless leader (Stalin).
All of this is an oversimplification, but I hope it gives you a place to start. Just remember that Capitalism in a necessary step toward socialism --- it helps create the wealth that can take care of all out needs if only distributed properly by socialism.
The situation at the farm before Old Major's dream is clearly meant to represent capitalism. In this system, the farmer (symbolizing the capitalists who own factories and such) is exploiting the animals. The animals make all the sacrifices, but Farmer Jones gets all of the benefits.
Old Major's dream of Animalism is a dream of a socialist paradise. In his vision, the workers will be the ones who own and run everything. No one will exploit their labor so only they will benefit from it. This is the socialist dream. As we see in the rest of the book, it doesn't exactly work out that way...
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