Almost all retail routers today come with a switch built in. It is considered a router but in reality it is a router and a switch. The router acts as the gateway and DHCP Server along with other things, the switch allows the connections to the router. Older commercial routers dont have a switch in them, you would have to have separate switch in the frame with the router.
A simple switch wouldn't have things like Port Forwarding or DHCP Server capabilities. The DHCP Server is what gives your PC, console, etc the Dynamic IP Address. You do not NEED a router to have a LAN, you can make one of the PCs on your network a DHCP Server or use all static IPs. It is just easier when you have a router.