Does one Thunderbolt port mean I can only add one additional screen? My iMac (mid 2011) looks to have one Thunderbolt connection. Does this mean I can only add one additional screen?
Thunderbolt is a serial bus and can be chained, so only having one port does not mean you can only have additional monitor. Assuming the Thunderbolt monitor has two Thunderbolt ports you can use the second one to chain the two monitors in series Thus having 3 monitors (2 external and one from your iMac).

How many monitors (and which resolution)can be driven by your iMac depends on your specific model though.