It can be the only router, as long as you don't have anything hardwired by Ethernet. (Only the one Ethernet port.) I switched off the wifi signal on my original router to test AirPort and found it managed fine.
(I changed the setup later so it could stay in n band mode for those gadgets that can handle that, while the older router handles b and g for everything else... At least I think that's what's happening with my current setup.)
Love it to pieces. Got the MacBook in the bedroom feeding iTunes to the old stereo, whilst simulcasting the same tracks to AirPort using Dolby ProLogic to make it surround in the front room, all controlled from my iPad. It's like living in the Space Age Bachelor Pad of the Future.