Is the Sir Mystery you met in the ballroom a Baronet or a Knight?
What's a baronet? That question encompasses several sub-questions: Is a baronet the same as a knight? Is there a knighting ceremony for a baronet? Does a baronet sit in the House of Lords? Is it hereditary? Is it part of the peerage? Is it a title or an honor? etc. Let's talk baronets!
In the hierarchy, there's the peerage (duke, marquess, earl, viscount, baron), followed by the baronetage, then knightage, and finally the landed gentry. If you've never explored Debrett's or Burke's Peerage, you should. Enjoy!
A baronet is that interesting middle position between a knighthood and the peerage. A baronet does not sit on the House of Lords, nor is he a member of the peerage. The baronetcy is, however, hereditary--the only hereditary honor that isn't part of the peerage. As such, the eldest son will become a baronet upon his father's death and be styled Sir First Name, just as his father before him. Although a baronetcy is a great honor, the baronet is, technically, a commoner. One might consider it the highest form of gentry, as it is not within the aristocratic rankings, nor is it part of the order of knighthood.
You'll recognize a baronet by their form of address: Sir. The address always uses first name rather than last: Sir Peter, for instance. There is no Lord Smith or Baronet of xyz because there is no territorial distinction. This is a personal honor rather than land holding. That said, baronets have in some instances been given land and/or an estate as part of the honor, but the land itself was not "a baronetcy" in the same way we think of "a dukedom." The land is not tied to the distinction of baronet. It would have merely been a gift in addition to the honor. In those cases, one might style themselves using a territorial designation: Sir Peter of Nutmeg--nutmeg being either the name of his estate or his address. In many ways, this was freeing because a baronet was not house-bound in the way so many peers have been wherein the estate and all its holdings are entailed to the title. The baronet could buy a haunted castle if he wanted and make his home there! (Oh, come on, just look at Sir Humphry of Chillingham Castle!)
The confusing part is knights vs baronets, especially when knights are also styled with Sir First Name. Knights and baronets are not the same thing, though, so don't get them confused (and should you ever meet a baronet, you'll know it's a grievous error to confuse the two!). In the pecking order of the hierarchy, baronets are above knights. A knighthood is granted to a person for an act of service and involves a knighting ceremony. Since it is an honor to the person for service, it is not hereditary. A baronet is in the much more honored position of receiving a hereditary title and being only one rung beneath the peerage (so close, yet so far). Good news with that is they don't have all the responsibilities that come with being a peer of the realm! Baronets will not be knighted. We've had quite a few knighthoods and honors of late--Sir Patrick Stewart, Dame Maggie Smith, etc. We have not, however, had a new baronet since the '60s.
When dealing with peers of the realm, we include their wives as part of the package--an earl has his countess, a duke his duchess, a baron his baroness, etc. With baronets, though, there is not a baronetess, although the wives of baronets do take on Lady Marital Surname as their address. For instance: Sir Peter and Lady Smith. The only way to be a baronetess is to be a Dame of one's own right. Here's something else rather interesting about forms of address with wives of baronets. Should Lady Smith wish to distinguish herself from her eldest son's wife after he inherits (who would then be Lady Smith, as well), she can from hereafter be referred to as Cynthia, Lady Smith or the Dowager Lady Smith. She cannot be called Lady Cynthia Smith. Interesting, no? Lady First Surname is only for the daughters of duke, marquess, and earls. Fascinating!
A baronetcy is a wonderful way to reward a person and their descendants for all they've done for Crown and country while not giving them too much power and ensuring they remain commoners rather than becoming peers. A perfect middle position--greater than a knight, less than a peer. Behold, the baronet.