1) An FFT or DFT "breaks down" a strictly real waveform into a finite number of sine waves, basis vectors for those N/2 frequencies that are exactly integer periodic within the FFT's length N. Any other frequencies are represent by a mix of all the other basis frequencies. (The mix will be shaped like the sum of 2 periodic Sinc or Dirichlet functions).
If you want more frequency resolution, you need to sample the input waveform for a longer length of time, and then use a longer FFT.
2) Whatever the sum of an infinite number of frequencies was in the original signal, they will be aliased and broken down into a mix of only N/2 basis frequencies by the sampling process, the FFT window length, and the FFT itself.
Because the FFT result vector can contain N/2 result bins, and any peak (that looks like a peak on a graph) requires a "dip" on either side (usually specified as 3 dB lower), there can only be a maximum N/4 peaks visible in a graph of the FFT result. Any other "peaks" will be hidden or blended into those.
An FFT magnitude spectrum graphing or plotting program can plot a lot more points, but those higher resolution plot points are just interpolations of the N/2 FFT result points.
3) Every FFT result bin (is that what you mean by line?) represents either an exact frequency of sinusoid (the frequency of one of the N/2 basis vectors), or a portion of a decomposition of some other non-periodic-in-aperture frequency of waveform into basis vectors. See Fourier decomposition.