Yes, the last 7 pills are sugar pills.
There is really no PURPOSE medically to take them, but many women feel more comfortable having a withdrawal bleed each month as to some it seems "unnatural" to not have a period (even though this bleed is not a real period). It is also a good indicator that women are not pregnant, if that is something they are worried about.
Your pills protect you every single hour of every single day, as long as you take them as directed and heed the warnings.
I assume the green pills are the7 inactive 'period pills'? It is perfectly safe to have sex that week, even during your bleeding time. To keep you safe, you do however have to take precautions to start the next pack right on time.
Your safest and healthiest option is the pill and condoms together. That way you are protected from infections and pregnancy with a backup method as well. It is a good idea to save the privilege of ejaculating inside you for the few long term partners you will have in your life time. That way you are sure that an STD or infection does not affect your ability to have children and enjoy sex once you find your life partner.