I understand that each geographical dataset has a CRS, and that in order to overlay them, you need to either make sure that all datasets use the same CRS, or re-project some of them (or use on-the-fly projection).
However, I do not really understand one thing; when I set the project CRS in QGIS, I am setting the CRS in which I wish to view the overlay. Now, if that particular CRS is a projected one, then I am comfortable viewing it on my (flat) screen. However, what if the CRS is geographic, such as WGS84? Do the axes then simply correspond to latitude and longitude?