You could use it either way. It's an external vibrator, but there's nothing that says you can't use a dildo at the same time (the same holds true for any clit vibe, really).
And like GirlOnGirl said, there's attachments you can use to make the Hitachi more versatile.
Since you're new with toys, just keep in mind that the Hitachi is very
strong, even on the lower setting. If there's a place near you that sells them (sex shops often have the Hitachi, and some pharmacies still sell it under its original purpose as a back massager) you might ask if you can plug one in to see how strong the vibrations are. That way you'd know before you ordered.