Confused about EPSHome Integration vs Add On

I installed the ESP Home integration from the Devices and Services | Integrations.
I see there is also a hassio add on, and that appears to allow over-the-air FW updates.
Can I run both? I have a notice to update my 2 M5Stack proxies with ESP Home 2023.8.0 or later. I am currently running Firmware: 2023.7.1 so it seems its a candidate for OTA.

You need both. The Add-on is the core of ESPHome and the Integration is where all of your devices live.

Corrections expected…

The integration is the method you use to get data to and from tpur esp devices and HA.

The addon is what you can use to make and update your ESP device firmware.
The addon is not needed and might even be undesirable in some cases.
The making (compiling) of the ESP firmware is a heavy process and smaller RPI like version 3 might not even be able to handle it and version 4 might be too hot if cooling is not provided in some way, but cooling might be undesirable in the normal use case.
That is why NabuCasa, who is behind ESPHome,have made other methods available, such as command line programs, which can then be run on your typically much more powerful desktop machine.
The command line programs actually also have a dashboard a little like the HA addon.

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Since 2022.11 it’s easy as one extra line to compile slower but cooler on low power machines :train::dash:

Running ESPHome on lower powered machines

People have noticed that trying to compile their projects on machine such as the Raspberry Pi 3 would crash either the whole machine or the ESPHome add-on, or Home Assistant. This is due to having less RAM and CPU power available to run all of the things at the same time. A new config option has been added as per the example below that should help to allow compiling on machines such as Raspberry Pi 3. By default ESPHome tries to compile using all of the processor cores, and this allows you to limit it to a lower amount.

esphome:
  ...
  compile_process_limit: 1

Actually these methods were available long before NabuCasa bought ESPHome from Otto :wink:

The RPi3 often have memory shortage too and even on a cooled RPi4 a compiling on a desktop might be the desired solution, because it is so much faster, which means you can handle many more updates in a shorter time, so no issues with having unresponsive devices several hours later when doing bulk updates.