These are names that are generic. They stand in for practice while writing. A dear john letter, by the way, is also a term for a letter which you will attempt to destroy a man's spirit. :)

If the name is John Smith and it is not a personal letter it would be Dear Mr. Smith. If you have met him before and you are on a first name basis with him, it would be Dear John. We never address people by their last names in letters or e-mails. Only friends can do that.

Who is John and Smith anyway? Is Smith is John's surname?

You would start a letter by writing at the top, the date, then say: "Dear John" or "Dear Mary", or "Dear Mr. Smith", "Dear Sir", "Dear Dr. Jones". Then state why your are writing, and give the information.