Yes, that is how it works. It is a separate hard-ticketed event. You get a wrist strap that you must show to attend any of the events at MVMCP (Mickey's Very Merry CHristmas Party). You are not allowed on any of the rides without the pass. THe fireworks are later in the evening to assure that people have cleared out who do not have passes -- nobody is going to sit on main street for three hours doing nothing, since you need the wristband pass to do anything. During the first two hours of the party, they enforce the wristband pretty directly, and even station cast members throughout the park to check wristbands of those walking around the park -- this is especially true in the stretch between Space Mountain and the far western edge of Fantasyland.
TIckets go on Sale in June. You can buy them online. The party does not take place every night. It occurs more often as the actual holidays approach.
One bonus -- thought the party starts at 7, they let you into the park with your MVMCP ticket at 4:00 -- so you get lots of time in the park, plus all the Christmas events in the evening.
Some personal notes: while I enjoy the party, there is nothing really spectacular about the christmas events themselves -- I've found it the best night during my stay in December to ride all the rides in the park since they are virtually abandoned between 7 and 10...The event was designed as a marketing gimmick to get local Orlando residents into the park during the holidays -- they come in droves for the free cookies, hot chocolate, and to get a somewhat "christmasy" feeling in otherwise humid Orlando. As such, all of the holiday events are packed (the parade, the shows, etc), while the rides remain relatively population free...If you are specifically interested in just the fireworks, there is NOTHING special about this holiday wishes show -- with the exception of using holiday music instead of the regular music, it is pretty much the same fireworks show you see during the rest of the year with a few christmas touches thrown in, absolutely nothing to say you are "glad you saw"