Ok, got it, thanks for the clear explanation.

So If I generate 25 keys in my wallet but don't use them, then generate some more and *do* use them, this gap might mean that my wallet could not be rebuilt successfully?

When I recover a wallet from a seed I end up with a master private key. That key is then used to generate other private keys. How does the wallet software know which private keys to generate, which are in use, and when to stop generating them? Surely it could generate an infinite number? Say I'd done 10,000 transactions in my wallet so there were 10,000 private keys. How would it know just to generate those 10,000?